Please ensure Javascript is enabled for purposes of website accessibility

Cantel Medical Corp. Closes Out the Year With a Solid Mix of Growth

By Brian Orelli, PhD - Oct 2, 2017 at 3:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The medical supply company is well on its way to meeting its five-year goal of doubling revenue and profit.

Cantel Medical (CMD) closed out its fiscal year that ended in July with a solid fourth quarter and looks to build on the year with impressive guidance for the fiscal year ahead. Here's a closer look at how things are going for the medical supply company.

Cantel Medical results: The raw numbers

Metric

Q4 2017

Q4 2016

Year-Over-Year Change

Revenue

$205.5 million

$179.0 million

14.8%

Income from operations

$27.3 million

$25.8 million

5.7%

Earnings per share

$0.41

$0.39

4.2%

Data source: Cantel Medical.

What happened with Cantel Medical this quarter?

  • A large chunk of Cantel's revenue growth came from acquisitions, but organic sales growth was still up a solid 9.2%.
  • Sales in Cantel's healthcare disposals segment continue to lead the pack in terms of year-over-year growth, up 23% in the fourth quarter, but as in previous quarters, the increase mostly came from the acquisition of Accutron. That year-over-year boost is going to run out soon.
  • The endoscopy segment saw sales increase 13.9%, driven by a 17.6% increase in recurring revenue; equipment sales seen in previous quarters are boosting recurring revenue. Additional growth in the segment should come from the recent acquisition of BHT Group, a German company specializing in automated endoscope reprocessing, which closed in August.
  • Water purification and filtration was up 13.7% as Cantel continues to work through its backlog of sales.
  • The dialysis segment was up just 1.4% year over year, but it's the smallest of the four segments.
  • While income from operations and earnings trailed revenue growth, much of the difference was due to the impact of costs from acquisitions, including a one-time charge for part of a business Cantel acquired but has decided it isn't worth continuing to sell. Excluding those and other charges, non-GAAP earnings were up 11.4% year over year.
Gloved hands holding an endoscope.

Image source: Getty Images.

What management had to say

President and CEO Jorgen Hansen pointed out that acquisitions are an important part of the company's five-year plan to double sales and profits by fiscal year 2021, stressing that investors should expect to see more in the year ahead:

"We look forward to continue executing on our acquisition strategy in fiscal year 2018 and beyond, and we look to add complementary products and technologies to our existing divisions, as well as the possibility of adding additional new related verticals to Cantel."

Hansen also commented on the effect of hurricanes Harvey and Irma, which had an immediate impact on the company because Cantel has a facility in Conroe, Texas:

"Our operations team prepared very well and we returned to normal operation status with a minimum disruption. While both storms have affected medical procedures in Texas and Florida, it is too early to determine the possible impact to our sales."

Looking forward

Management is looking for sales growth of 12.5% to 13.5% with 8.5 to 9 percentage points of that coming from organic growth. The remainder of the growth will come from 3.5 to 4 percentage points of revenue from newly acquired products and 0.5 percentage points from changes in currency exchanges.

Earnings per share are expected to increase 20% to 25% on a GAAP basis, but that's due to the one-time charges in the recently completed year. Backing those out, earnings per share are expected to increase 10% to 13% year over year.

If Cantel can hit those growth numbers, it'll be well on its way to reaching its five-year goal.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Cantel Medical Corp. Stock Quote
Cantel Medical Corp.
CMD

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.