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C.R. Bard (BCR) Initiated at 'Hold' by Brean Capital

 November 20, 2012 01:03 PM

(By Balaseshan) C.R. Bard Inc. (NYSE: BCR) shares were initiated with a "hold" rating by Brean Capital LLC analyst Jason Wittes.

BCR is a leading hospital supply name, with market leading share in its four businesses (urology, specialty surgery, oncology and peripheral vascular). In Wittes' view, three out of those four businesses are maturing, oncology being the exception, making BCR more vulnerable to competition, hospital price and volume pressure.

As a result, the company has seen organic revenue growth drop to low single digits, and the analyst doesn't see a clear catalyst for acceleration until at least 2014, when investments, notably, Lutonix, kick in.

[Related -C.R. Bard (BCR) 4Q Earnings Increase 13 Pct, Beat Estimates]

Until then, the company looks to continue to invest, though much of that will be financed with an expected $1 billion payment (plus ongoing royalties) from the Gore settlement, which is expected by mid 2013, the analyst noted.

To offset a sluggish outlook, the company has stepped up its investments, including Drug Eluting Balloons with last year's Lutonix acquisition and Neomed for entry into the tissue sealing market, both representing billion dollar market opportunities, but with near-term dilution through 2013, Wittes noted.

The analyst said BCR also has above-average exposure to the U.S. (two-thirds of revenues), which similarly is a near-term drag, but long-term opportunity to expand into emerging markets (which are 6 percent of revenues, but growing 30 percent-plus).

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Wittes said visibility remains challenged going into 2013, but most of the bad news appears priced in and the company is making the right moves for a longer-term recovery. He looks to get more constructive on the name as the Lutonix and similar investments come closer to market.

BCR is trading up 0.06 percent at $97.34 on Tuesday.



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