Cantel Medical Corp. Closes Out the Year With a Solid Mix of Growth

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Cantel Medical (NYSE: CMD) closed out its fiscal year that ended in July with a solid fourth quarter and looks to build on the year with impressive guidance for the fiscal year ahead. Here's a closer look at how things are going for the medical supply company.

Cantel Medical results: The raw numbers

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What happened with Cantel Medical this quarter?

  • A large chunk of Cantel's revenue growth came from acquisitions, but organic sales growth was still up a solid 9.2%.
  • Sales in Cantel's healthcare disposals segment continue to lead the pack in terms of year-over-year growth, up 23% in the fourth quarter, but as in previous quarters, the increase mostly came from the acquisition of Accutron. That year-over-year boost is going to run out soon.
  • The endoscopy segment saw sales increase 13.9%, driven by a 17.6% increase in recurring revenue; equipment sales seen in previous quarters are boosting recurring revenue. Additional growth in the segment should come from the recent acquisition of BHT Group, a German company specializing in automated endoscope reprocessing, which closed in August.
  • Water purification and filtration was up 13.7% as Cantel continues to work through its backlog of sales.
  • The dialysis segment was up just 1.4% year over year, but it's the smallest of the four segments.
  • While income from operations and earnings trailed revenue growth, much of the difference was due to the impact of costs from acquisitions, including a one-time charge for part of a business Cantel acquired but has decided it isn't worth continuing to sell. Excluding those and other charges, non-GAAP earnings were up 11.4% year over year.

What management had to say

President and CEO Jorgen Hansen pointed out that acquisitions are an important part of the company's five-year plan to double sales and profits by fiscal year 2021, stressing that investors should expect to see more in the year ahead:

Hansen also commented on the effect of hurricanes Harvey and Irma, which had an immediate impact on the company because Cantel has a facility in Conroe, Texas:

Looking forward

Management is looking for sales growth of 12.5% to 13.5% with 8.5 to 9 percentage points of that coming from organic growth. The remainder of the growth will come from 3.5 to 4 percentage points of revenue from newly acquired products and 0.5 percentage points from changes in currency exchanges.

Earnings per share are expected to increase 20% to 25% on a GAAP basis, but that's due to the one-time charges in the recently completed year. Backing those out, earnings per share are expected to increase 10% to 13% year over year.

If Cantel can hit those growth numbers, it'll be well on its way to reaching its five-year goal.

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Brian Orelli has no position in any of the stocks mentioned. The Motley Fool recommends Cantel Medical. The Motley Fool has a disclosure policy.