Greatbatch Is Still an Underperform

| About: Integer Holdings (ITGR)

We recently reiterated our ‘Underperform’ rating on Greatbatch, Inc. (GB) with a target price of $18 based on a P/E of 10.9x our fiscal 2010 EPS estimate of $1.65. The company reported disappointing fourth quarter and fiscal 2009 results with top-line erosion witnessed in both these periods and across all business segments.

Total revenue in the fourth quarter declined 14% year over year to $125.8 million. Greatbatch Medical revenue declined 14% year over year to $108.8 million. In this segment, CRM/Neuromodulation, Orthopedic and Vascular Access revenue declined 5%, 29% and 32% year over year to $76 million, $25.2 million and $7.6 million, respectively.

CRM/Neuromodulation revenue declined due to lower sales of Greatbatch batteries. Orthopedic revenue declined as a result of a weak economic scenario that prompted patients to defer their elective procedures. Vascular Access sales declined primarily due to lower introducer sales as a result of customer inventory adjustments.

Electrochem sales declined 14% year over year to $17.1 million. The decline was primarily due to a slowdown in the Energy and Portable Medical markets that resulted in customers lowering their inventory levels and deferring projects.

In fiscal 2009, total revenue declined 5% year over year to $521.8 million. Greatbatch Medical revenue declined 3% year over year to $455.1 million. Electrochem sales declined 15% year over year to $66.8 million.

Earnings per share of 40 cents in the fourth quarter was considerably lower than the year-ago figure of 50 cents though it was higher than the Zacks Consensus Estimate of 34 cents.

Greatbatch, Inc., headquartered in Clarence, NY, is a leading producer and supplier of batteries, capacitors and components used in implantable medical devices.

The company also produces batteries for commercial and industrial applications such as oil and gas exploration, oceanographic equipment, seismic surveying equipment and others. The National Aeronautics and Space Administration (NASA) uses Greatbatch’s batteries in its aerospace programs.