If the blitz of gee-whiz medical technology ideas like surgical robots, advanced neurostimulators, and lasers has you feeling a bit weary, CR Bard
Net sales rose about 7% this quarter, with about two percentage points of incremental growth sapped by a voluntary product recall. A solid mid-teens performance in oncology and a low-teens result from vascular led CR Bard's growth. Urology, the company's largest segment, was a laggard at 3% growth, while the surgery business actually shrank about 2% from last year.
While the gross margin was hurt by the recall of the Composix Kugel Mesh X-Large Patch, that particular event only accounted for about half of the drop. Nevertheless, a 130-basis-point fall in gross margin isn't exactly a total disaster, and the company still managed to boost its operating margin by 130 basis points. On the bottom line, the company saw 12% income growth net of special items.
Over the next two years or so, I think it's reasonable to expect further improvement in Bard's growth. The company has been a fairly active acquirer in the past, and management seems ready to move forward on new deals. Internally, past R&D investments seem to be paying off, as new products like an RF ablation catheter, sling fixation system, and hernia implant reach the market.
The downside, though, is that the stock seems to suggest that investors already expect this rise in growth. Even giving the company the benefit of the doubt and estimating an above-average level of cash flow growth doesn't produce a price target that excites me today. Nevertheless, with M&A activity from the likes of Boston Scientific
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). Tyco is a Motley Fool Inside Value recommendation. The Fool has a disclosure policy.