July 21, 2009 / 11:44 AM / 10 years ago

UPDATE 3-Kinetic Concepts Q2 profit beats Street, keeps FY view

* Q2 EPS $0.82 vs est $0.80

* Q2 revenue up 6 percent to $491.3 mln

* Reaffirms FY ‘09 view

* Shares up as much as 12 percent

(Adds analyst comment, updates share movement)

By Shailesh Kuber

BANGALORE, July 21 (Reuters) - Kinetic Concepts Inc KCI.N posted a better-than-expected quarterly profit, driven by increased productivity in its field service operations and higher gross margins related to the regenerative medicine business unit.

“Management has done a good job responding to competitive pressure in the near term with enhanced promotional programs and flexible terms for its hospital customers,” Piper Jaffray analyst Matt Miksic wrote in a research note.

Shares of Kinetic rose as much as 12 percent making them one of the top percentage gainers on the New York Stock Exchange.

For the second quarter, the medical device maker earned $58.1 million, or 82 cents per share, compared with a net loss of $4.8 million, or 7 cents a share, in the year-ago period.

Revenue rose 6 percent to $491.3 million.

Analysts on average had expected 80 cents a share, before items, on revenue of $488.4 million.

JP Morgan analyst Michael Weinstein said, “On the top line, the upside was likely due to foreign exchange, while Kinetic’s bottom line beat came from an impressive gross margin.”

Adjusted for non-cash acquisition related items, the company said it earned 98 cents a share.

Regenerative medicine revenue rose 22 percent to $71.1 million, on a pro forma basis.

Looking ahead, the company said it still expects 2009 earnings of between $3.95 and $4.10, excluding items, on revenue of $1.95 billion to $2.0 billion.

“Effectively, management’s guidance range assumes that the pressures on the business in first-half 2009, such as the capital spending environment, do not improve in the second half,” analyst Weinstein wrote.

Piper Jaffray’s Miksic, who maintained an “underweight” rating on the stock, remained cautious on Kinetic’s long-term prospects given challenges such as increasing competition and pricing pressures faced by the company.

Shares of the company were up 7 percent at $27.94 in late morning trade. They touched a high of $29.20 earlier in the session. (Editing by Aradhana Aravindan)

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