On Thursday, Needham maintained a Buy rating on CONMED Corporation (NYSE:CNMD) but reduced the price target from $129.00 to $107.00.
The decision follows CONMED's first-quarter 2024 results, which revealed a slowdown in organic revenue growth to 5.9% year-over-year from 31.5% in the previous quarter. Despite this deceleration, the company's revenue and earnings per share (EPS) still surpassed consensus estimates.
Gross and operating margins saw improvements, with gross margin increasing by 160 basis points (bps) year-over-year and operating margin by 70 bps. However, CONMED's management has revised their revenue and EPS guidance downward, citing a $10 million incremental currency headwind and a rise in interest expenses.
The company remains optimistic about the second half of 2024, expecting revenue growth and margin improvements to significantly outpace the first half due to anticipated improvements in the Orthopedics supply chain. This optimism is reflected in Needham's decision to retain a Buy rating on CONMED's shares.
The revised price target to $107 is attributed to a lower 2025 EPS estimate for CONMED and a general compression of peer multiples. Despite the challenges faced in the first quarter and the adjustments to future guidance, Needham's outlook for CONMED remains positive, with an expectation of a stronger performance in the upcoming quarters.
InvestingPro Insights
As CONMED Corporation (NYSE:CNMD) navigates a challenging quarter with revised guidance, investors are looking closely at the company's financial health and market position. According to the latest data from InvestingPro, CONMED's market capitalization stands at a solid $2.15 billion, with a P/E ratio that has adjusted to a more attractive 23.98 over the last twelve months as of Q1 2024. This suggests that while the stock is trading at a premium, it may also be poised for growth, especially considering its PEG ratio of 0.19, indicating potential undervaluation relative to its earnings growth.
InvestingPro Tips highlight that CONMED's net income is expected to grow this year, and the Relative Strength Index (RSI) suggests the stock is currently in oversold territory. These insights could signal a potential buying opportunity for investors. Furthermore, the company has demonstrated a commitment to shareholder returns, maintaining dividend payments for 13 consecutive years. For those interested in exploring more detailed analysis, InvestingPro offers additional tips on CONMED, which can be accessed with a special coupon code for an extra 10% off a yearly or biyearly Pro and Pro+ subscription. Use the code PRONEWS24 to unlock these benefits and discover the 7 other InvestingPro Tips that could help inform your investment decisions.
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