CONMED: Putting the competition under the knife

An aging population and increased spending on medical care has meant big money for CONMED Corporation (Nasdaq:CNMD).

The Utica, N.Y.-based medical device maker has been around since 1973 when it was known as Consolidated Medical Equipment. Its first product was a disposable ECG monitoring electrode. The company went public in 1987 and in 1989 it acquired Aspen Labs from Bristol-Myers Squibb (NYSE:BMY) to bolster a growing electrosurgery line of products. Today CONMED stands at a market cap of $920 million and derives approximately 60% of its revenue from powered surgical instruments and devices used in the orthopedic surgery market.

The company’s arthroscopy segment, which accounts for nearly 40% of the firm’s revenue, manufactures arthroscopes, tissue repair sets and video imaging systems used in surgery. CONMED’s powered surgical instruments business makes powered saws, drills and related disposable accessories that are used in various surgical procedures. Each of CONMED’s business segments have shown the ability to adapt to changing trends and a push toward disposable instruments. Approximately 75% of the company’s revenue comes from the sale of single-use products.

The company is fresh off of a record quarter. Last month, it reported second-quarter results that included a 34% surge in EPS on a 13.9% rise in sales versus the year-ago quarter. The company benefited from strong growth in its arthroscopy and electrosurgery product lines, which grew 18% and 16.7%, respectively, on a year-over-year basis. CONMED was also able to improve its gross margin percentage and expand sales internationally. This performance has helped propel the company’s stock price. Year to date, shares of CONMED are up 38.47%.

The rise in price of this stock has been a pleasant surprise to one analyst. Back in April, when the company announced its first-quarter results, Mark Mullikin, a senior research analyst for Piper Jaffray (NYSE:PJC), set a price target of . . .

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