Here's Why You Should Retain CONMED Stock in Your Portfolio for Now

CONMED Corporation CNMD is well poised for growth in the coming quarters, courtesy of its broad product spectrum. The optimism, led by the solid recurring revenue base and potential in General Surgery, is expected to contribute further. However, headwinds from supply-chain constraints and data security threats persist.Shares of this Zacks Rank #3 (Hold) company have lost 35.6% so far this year against the industry’s 1.5% growth. The S&P 500 Index has increased 26.2% in the same time frame.CONMED, a renowned global medical products manufacturer specializing in surgical instruments and devices, has a market capitalization of $2.18 billion. The company projects 19.6% earnings growth for fiscal 2025 and expects to maintain its strong performance going forward.Its earnings surpassed estimates in three of the trailing four quarters and missed the same once, delivering an average surprise of 3.71%.Image Source: Zacks Investment ResearchFactors Favoring CNMD StockRevenues Likely to Ride Macro Tailwinds: CONMED's revenue growth in the third quarter of 2024 was driven by multiple factors, showcasing the strength of its product portfolio and market positioning. A notable contributor was the AirSeal system, which experienced robust growth in both capital sales and disposable products within the U.S. market. This was driven by its clinical advantages in robotic-assisted surgeries, especially for complex and longer procedures, reaffirming its value among surgeons. The continued strong performance of the AirSeal system, both in capital sales and disposables, will likely remain a significant contributor.Meanwhile, the orthopedics segment also played a critical role, achieving a 5.2% year-over-year global increase, with the U.S. market leading at 7.4%. This growth was supported by ongoing improvements in supply-chain management and efforts to enhance product availability. The general surgery division saw a mixed performance, with a 7.4% revenue rise in the United States, offsetting a 5% decline internationally, facing challenging comparisons against a strong prior-year quarter. Improvements in general surgery and orthopedic supply-chain efficiency could enable the company to meet increased customer demand and capture additional market share.Expanding Margins Look Promising: Margin expansion was another highlight for the quarter, reflecting operational efficiencies and disciplined cost management by CNMD. The adjusted gross margin improved to 56.5%, marking a 60-basis-point increase from the previous year. This can be attributed to a favorable product mix and strategic measures to optimize production. The company is targeting a gross margin of approximately 57% for the fourth quarter, underscoring its emphasis on optimizing product mix and operational performance.Additionally, adjusted selling, general, and administrative (SG&A) expenses were reduced to 37.2% of sales, representing a 50-basis-point decline year over year, underscoring the company's commitment to effectively managing expenses. These not only contributed to profitability but also bolstered CONMED’s capacity to sustain leveraged earnings growth, positioning the company for continued financial strength.Solid Recurring Revenue Base: CONMED's performance is bolstered by its business model, with approximately 85% of revenues coming from recurring sales of single-use disposable products. These items are being increasingly favored by hospitals and clinics as they reduce sterilization costs, minimize infection risks and lower post-operative care expenses.The remaining 15% of revenues comes from capital equipment sales, such as surgical tools and imaging systems. This, in turn, drives the demand for complementary single-use products, further contributing to CONMED's sustained growth.DownsidesRegulatory Requirements: CONMED may face potential downsides due to regulatory scrutiny and compliance challenges associated with its classification as a manufacturer of Class II medical devices. The company is subject to inspections by the FDA and international regulatory bodies, which can lead to significant costs in response to compliance issues. These factors could negatively impact the company's operations and financial performance.Data Security Threats: CONMED may be at risk due to its heavy reliance on information technology (IT) systems for managing sensitive business-related and customer data. The company faces significant cybersecurity threats that could jeopardize the security, confidentiality, and integrity of its data. These factors could negatively impact CONMED's operational stability and financial performance, posing a downside for investors.CONMED Corporation Price CONMED Corporation price | CONMED Corporation QuoteEstimate TrendCONMED is witnessing a positive estimate revision trend for 2024. In the past 60 days, the Zacks Consensus Estimate for earnings improved 1% to $4.03 per share.The Zacks Consensus Estimate for fourth-quarter 2024 revenues and earnings per share is pegged at $341.3 million and $1.21, respectively, suggesting 4.4% and 14.2% growth from the year-ago reported numbers.Some better-ranked stocks from the medical industry are Masimo MASI, Accuray ARAY and Globus Medical GMED.Masimo, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 10% for 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Masimo’s shares have risen 45.9% year to date compared with the industry’s 4.8% growth.Accuray, carrying a Zacks Rank of 2 at present, has an estimated growth rate of 106.3% for fiscal 2025. ARAY’s earnings missed estimates in three of the trailing four quarters and met once, delivering a negative average surprise of 141.97%.Accuray shares have lost 36.4% year to date against the industry’s 4.8% growth.Globus Medical, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 14.1%. GMED’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.65%. Its shares have risen 56.8% year to date compared with the industry’s 4.8% growth.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Accuray Incorporated (ARAY): Free Stock Analysis Report CONMED Corporation (CNMD): Free Stock Analysis Report Masimo Corporation (MASI): Free Stock Analysis Report Globus Medical, Inc. (GMED): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks