Invacare Corp.: A safe haven for capital
As the credit crisis continues to roil markets, restless investors are on the lookout for safe havens to deploy capital. Enter Invacare Corp. (NYSE:IVC), which operates in the medical equipment space oasis, manufacturing such items as power and custom manual wheelchairs, home-care beds and oxygen concentrators for home-health care, retail and government internationally.
Given that Invacare operates in the health-care sector, it doesn’t experience earnings erosion due to adverse macroeconomic trends. As such, money has been funneling into this sector and this stock. Six new positions were initiated in the last three months, while none sold out.
New legislation passed in July will assist in avoiding disruptions to patient service and provide stability, providing even more demand that is strong at home and abroad. Organic sales grew 7.8% in the second quarter, driven by sales in Invacare’s North American home medical equipment market and strong demand in Europe. For the second quarter ended June 30, 2008, sales were up 13.7% to $447.2 million, compared with $393.3 million in 2007. Non GAAP net income increased to $7 million, or $0.22 per share, compared with non GAAP net income of $4.3 million, or $0.14 per share.
Aside from an inherently strong business, the company is streamlining costs and reducing net interest expense as it pays off its debt, which is favorable in this financing climate.
Before you take the plunge, though, be aware that Invacare is grappling with increased freight and higher commodity costs as well as reimbursement pressures in Europe. To combat that, the company is selectively increasing prices in all segments and has put in place freight policy changes for the third quarter.
Going forward, Invacare expects organic growth in net sales of 5% to 6% in 2008. The company also narrowed its free cash flow guidance range by $5 million on account of greater-than-anticipated working capital needs to support sales.
Although it narrowed its free cash flow range, Invacare’s got enough cash in its coffers to give it back to the shareholders. The company recently declared a cash dividend of $.0125 per share on its common shares and $.011364 per share on its Class B common shares.
Wall Street is certainly warming up to Invacare. Stifel Nicholas upgraded the stock to “buy” at the end of July. Though investors ought to be leery of valuation as the stock is trading around $25.17 per share and analysts on average have pegged fair value at $28 per share.
Still, if you’re seeking refuge from nonexistent returns, Invacare could be a safe bet.
Given that Invacare operates in the health-care sector, it doesn’t experience earnings erosion due to adverse macroeconomic trends. As such, money has been funneling into this sector and this stock. Six new positions were initiated in the last three months, while none sold out.
New legislation passed in July will assist in avoiding disruptions to patient service and provide stability, providing even more demand that is strong at home and abroad. Organic sales grew 7.8% in the second quarter, driven by sales in Invacare’s North American home medical equipment market and strong demand in Europe. For the second quarter ended June 30, 2008, sales were up 13.7% to $447.2 million, compared with $393.3 million in 2007. Non GAAP net income increased to $7 million, or $0.22 per share, compared with non GAAP net income of $4.3 million, or $0.14 per share.
Aside from an inherently strong business, the company is streamlining costs and reducing net interest expense as it pays off its debt, which is favorable in this financing climate.
Before you take the plunge, though, be aware that Invacare is grappling with increased freight and higher commodity costs as well as reimbursement pressures in Europe. To combat that, the company is selectively increasing prices in all segments and has put in place freight policy changes for the third quarter.
Going forward, Invacare expects organic growth in net sales of 5% to 6% in 2008. The company also narrowed its free cash flow guidance range by $5 million on account of greater-than-anticipated working capital needs to support sales.
Although it narrowed its free cash flow range, Invacare’s got enough cash in its coffers to give it back to the shareholders. The company recently declared a cash dividend of $.0125 per share on its common shares and $.011364 per share on its Class B common shares.
Wall Street is certainly warming up to Invacare. Stifel Nicholas upgraded the stock to “buy” at the end of July. Though investors ought to be leery of valuation as the stock is trading around $25.17 per share and analysts on average have pegged fair value at $28 per share.
Still, if you’re seeking refuge from nonexistent returns, Invacare could be a safe bet.
About the Author
Reporter Jennifer Schonberger is based in SmallCapInvestor.com's Washington, D.C. bureau.
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