Home health products maker Invacare Corp.‘s (NYSE:IVC) fourth-quarter adjusted earnings beat Wall Street analysts’ expectations, thanks to organic sales growth and reduced interest expenses.
For the full year of 2010, Invacare reported adjusted earnings per share of $1.84, its third consecutive year of double-digit earnings growth. In 2011, the company projects earnings per share between $2.05 and $2.15. The middle of that range, $2.10, would represent growth of 14 percent over the prior year.
For the fourth quarter, adjusted earnings per share stood at 65 cents, 2 cents more than the consensus analysts’ estimate. (Non-adjusted earnings per share were much lower, due to special items — primarily the Elyria, Ohio, company’s moves to reduce its debt load.)
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Nearly every analyst who questioned Invacare executives on a conference call congratulated the company for a “great quarter” or “nice quarter.” Analysts particularly seemed pleased with the company’s 1.6 percent organic sales growth in the quarter, which was helped by gains in incontinence, ostomy, enteral and urological products, according to the company. Overall, net sales in the quarter grew about 1 percent to $452 million.
As Invacare continues to reduce its debt load, the company’s finances are stabilizing, allowing it to look toward making strategic acquisitions or buying back stock.
None of the analysts who questioned Invacare executives brought up a U.S. Food and Drug Administration warning letter that the company received last month, detailing unsubstantiated reports of fires, entrapments and deaths caused by the company’s adjustable electric beds. That indicates analysts likely aren’t concerned that the warning letter or the violations it cited will become problems for Invacare.
“Of the complaints that are detailed in the letter to illustrate the FDA’s points on documentation, investigations to date show that no injuries or deaths were caused by a product defect,” the company said in a statement.
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One area of sales that suffered was respiratory products, which fell 22 percent in the quarter. The company blamed uncertainty surrounding a new Medicare and Medicaid initiative around competitive bidding for durable medical equipment (DME), such as walkers, oxygen and power wheelchairs. The idea behind the competitive bidding program, which took effect on Jan. 1 in nine cities, is to implement a market-based pricing system, which resulted in reimbursement cuts to DME that averaged 32 percent.
Since the competitive bidding program has been rolled out to just nine geographical markets thus far, Invacare doesn’t see it having a big impact on its business in 2011, but that could change in the future as the program spreads.
As always, government reimbursement is an issue that the company will keep its eyes on. In particular, state Medicaid spending could take a hit as many states, including Ohio, grapple with big budget deficits. Substantial Medicaid cuts could take a bite out of Invacare’s sales.
The company’s shares were trading down about 2 percent at $28.83 on an overall down morning for the equities markets.
