American Medical (AMMD) Remains Neutral

We reiterate our Neutral recommendation on leading pelvic-health devices maker American Medical Systems (AMMD). Earnings for second-quarter fiscal 2010 beat the Zacks Consensus Estimate by a penny while profit soared 22% year-over-year on account of higher sales which spiked roughly 8% in the quarter. However, sales narrowly missed the Zacks Consensus Estimate.

American Medical’s Men’s Health segment posted 7.7% year-over-year revenue growth boosted by higher demand for the erectile restoration and male continence product lines. Its Women’s Health business delivered mid-teen revenue growth buoyed by higher sales of pelvic floor repair products. American Medical reaffirmed its fiscal 2010 revenue and earnings forecasts.

Minnesota-based American Medical is a world leader in manufacturing medical devices and procedures for treating health problems of both men and women. In addition to U.S. , the company sells its products in Canada , Asia, Australia , Europe and South America .

American Medical has a strong pipeline and remains focused on rolling out new products to drive growth. The company unveiled the GreenLight laser therapy for treating enlarged prostate during the second quarter. Moreover, it received FDA approval in June 2010 for the MiniArc Precise single-incision sling system for the treatment of female stress urinary incontinence (SUI).

Other positive factors are represented by the company’s dominant position in both male and female incontinence markets, healthy margins and a sound balance sheet. Higher sales coupled with tight cost-control initiatives are helping the company to expand margins on a sustainable basis.

However, American Medical’s European markets are yet to recover from the macroeconomic headwinds. Moreover, the company faces stiff competition from larger players like Boston Scientific (BSX) and Johnson & Johnson (JNJ). American Medical is also exposed to a significant risk of reimbursement cuts from third-party payers.

AMER MED SYS (AMMD): Free Stock Analysis Report

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