Wright Beats Zacks Estimate

Wright Medical Group, Inc. (NASDAQ:WMGI) reported fourth quarter and full fiscal 2009 results. For the fourth quarter, earnings per share were 27 cents, beating the Zacks Consensus Estimate of 19 cents. However, earnings were lower than the year-ago figure of 31 cents.  For fiscal 2009, earnings per share were 85 cents, compared to the Zacks Consensus Estimate of 60 cents and the year-ago figure of 92 cents.
 
Quarterly results
 
Total revenues in the fourth quarter increased 8.0% year over year to $129.9 million, ahead of the company’s guidance of $122 million to $127 million. Excluding a favorable impact of foreign currency translation (FX), net sales increased 5% year over year.
 
Excluding Biologics products, total revenues increased across all business segments. Hip, Knee, Extremity and Other products increased 7.0%, 5.6%, 21.9%, and 6.8% year over year, respectively. Biologics product revenue declined 1.9% year over year in the reported quarter.
 
Hip, Knee and Extremity are Wright’s three largest business segments that contributed 34.5%, 24.2% and 23.3% to total revenues in the fourth quarter of 2009, respectively.
 
Wright witnessed a contraction in margins in the fourth quarter. Gross margin declined 10 basis points (bps) year over year to 70.7%. Operating margin declined 480 bps year over year to 3.5%.
 
Fiscal year results
 
Total revenues in fiscal 2009 increased 4.7% year over year to $487.5 million. Excluding Biologics and Other category, growth was registered across all business segments.
 
On a geographic basis, the U.S. contributed roughly 61.5% to total revenues and increased 6.2% year over year. International revenues increased 2.4% year over year.
 
Wright ended fiscal 2009 with cash, cash equivalents and short-term marketable securities of $171.2 million, an increase of 17.7% year over year. The company reported a free cash flow of $10.8 million in the fourth quarter and a record $34.6 million in fiscal 2009.
 
Outlook
 
Wright expects total revenues between $515 million and $530 million in fiscal 2010, an increase of 6% to 9% year over year. Earnings per share should range between 88 cents and 94 cents, an increase of 4% to 11% year over year.
 
Wright Medical is a global orthopedic devices company specializing in the design; manufacture and marketing of reconstructive joint devices and bio-orthopedic materials.

The orthopedic industry is highly competitive, and Wright Medical faces challenges from large players, such as, Zimmer Holdings Inc. (NYSE:ZMH), Stryker Corp. (NYSE:SYK), Johnson & Johnson/De Puy (NYSE:JNJ), Smith & Nephew plc. (NYSE:SNN) and Biomet.

Presently, we have a Neutral recommendation on Wright Medical.