INVACARE CORP. $20 (New York symbol IVC, Conservative Growth Portfolio, Consumer sector; Shares outstanding: 32.1 million; Market cap: $642.0 million; WSSF Rating: Average) makes wheelchairs, motorized scooters and other mobility and home care products.
The stock fell from $27.75 in November 2007 to $16.13 in April 2008, due to concerns over the pace of Invacare’s restructuring, which includes shifting production to low-cost countries and simplifying its product lines.
Thanks mainly to a $3.7 million drop in costs, Invacare’s first-quarter earnings before unusual items shot up to $0.11 a share (total $6.2 million) from $0.05 a share ($1.5 million) a year earlier. However, the latest earnings figure fell well short of consensus estimates of $0.24 a share. Sales in the quarter improved 11.0%, to $416.3 million from $374.9 million. Foreign currency translation accounted for 5% of that increase. If you exclude acquisitions, sales in the quarter rose 5.8%.
Invacare’s latest restructuring plan now aims to cut annual costs by $20 million, starting in 2008. These savings should help it cope with rising prices for steel, aluminum and fuel.
Lower costs will also help the company deal with changes to the way Medicare reimburses buyers of wheelchairs and breathing equipment. The new system will force medical suppliers to bid for the right to compete for new contracts. That could lead to lower Medicare payouts, and increases Invacare’s risk.
Invacare feels cost savings and higher sales in the second half of the year will let it earn $1.35 to $1.50 a share in 2008. That’s in line with the consensus estimate of $1.39 a share, and the stock trades at 14.4 times that figure. The $0.05 dividend yields 0.3%.
Invacare is a buy.
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