Kinetic Concepts, Inc. (KCI), the manufacturer of negative pressure wound therapy, has surprised on estimates 3 out of the last 4 quarters by an average of 8.73%. KCI trades with a PEG ratio of just 0.75.

Company Description

Kinetic Concepts manufactures health care products in the areas of advanced wound care, negative pressure wound therapy (NPWT) and Therapeutic Support Systems.

The company has three business segments: Advanced Wound Care which includes the Vacuum Assisted Closure system; Regenerative Medicine which includes tissue-based products for use in reconstructive, orthopedic and urogynecologic surgical procedures; and Therapeutic Support Systems which includes specialty hospital beds and mattress replacement systems.

On June 29, Kinetic announced it would acquire the patents and intellectual property of Hill-Rom’s Negative Pressure Wound Therapy. It included both U.S. and foreign patents. Terms of the deal were not disclosed.

Revenue Rose 12% in the First Quarter

On Apr 21, Kinetic Concepts reported first quarter results that missed on analysts’ estimates by a penny. However, revenue was up 12% to $470.1 million from the year ago period. Adjusted earnings per share were 82 cents compared to 94 cents in the first quarter of 2008. Analysts expected 83 cents.

The tough economic conditions, especially weak global demand, impacted first quarter results.

“Despite this challenge, we were encouraged as demand for our innovative and high-value therapies in the areas of Wound Healing and Regenerative Medicine was solid and we increased gross margins through improved productivity and product mix,” said Catherine Burzik, President and Chief Executive Officer of KCI.

2009 Guidance

The company provided guidance of adjusted earnings per share for 2009 of $3.95 to $4.10.

Earnings Estimates Rise

Analysts have scrambled to keep up with the company’s guidance range for the year. Full-year estimates jumped 11.23% in the last 30 days to $3.86 from $3.47 per share.

Second-quarter estimates also climbed by 9 cents to 95 cents during the same period with 2 out of 4 covering analysts raising.

Value Fundamentals

Kinetic Concepts is a Zacks #1 Rank (strong buy) stock. It is cheap, trading at only 7.26x forward earnings. Its price-to-book is 2.09. The company has a stellar 1-year return on equity of 31.78%.

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