ICU Medical (ICUI) has always been an unusually volatile stock, mostly due to the company's reliance/relationship with Hospira (HSP). I had hoped that with ICUI's acquisition of HSP's critical care business and the company's expansion of domestic distribution, that volatility would ease up.
Silly wabbit.
ICUI missed on the top and bottom lines, and is taking a spanking in the market today.
To some extent, this quarter was a "ghost of Hospira" situation, as the critical care business once again under-delivered the goods. Sales were softer than I had been hoping and yet the influence of these sales was still sufficient to lower the gross margin more than I had expected.
On the plus side, the company's core CLAVE business was quite strong, even as the custom tubing business was a little weak. What's more, the company saw great growth in domestic distribution and overseas sales, and Hospira was about 37% of the company's sales. On top of that, the company is apparently making great progress with its plant (under construction) in Slovakia. This plant could be a key catalyst for improving overseas growth; a very under-penetrated market for ICUI.
I still think that this year will be something of a kitchen sink for the company, as management tries to repair the badly neglected critical care business that it bought from Hospira and as the company faces various costs in opening that plant in Slovakia. Longer term, though, I think the company can get a lot of leverage out of both -- critical care is a decent market with only one real competitor (Edwards (EW)) and a little attention and focus here could reap some meaningful cash flow and growth. With the Slovakia plant on line, the company could look to several years of strong (25%+) revenue growth with even better margins and more predictability.
And hey, let's not forget that management basically maintained its guidance -- suggesting that the first half of the year may be a little worse than I'd hoped, but that the second half could be meaningfully better.
ICUI is a stock that will drive you crazy, but I think you can buy it here and make decent money on it. It's not going to be a go-go grower like Intuitive Surgical (ISRG) or a darling like Illumina (ILMN). What it is, though, is a proven generator of ample cash flow and a management team that does not waste shareholders' time or money.
At this price, I have to admit that I'm thinking of adding it to my own PA.
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