Greatbatch swings to first-quarter loss, shares hit new low

CLARENCE, N.Y.—Medical components maker Greatbatch Corp. said late Tuesday that it swung to a loss in the first quarter -- sending shares to a new low -- as acquisition-related charges and increased manufacturing costs weighed on the company's margins.

Shares plunged $2.57, or 13.9 percent, to $15.90 in midday trading Wednesday. Shares hit a new 52-week low of $15.66 earlier in the session. In the past 12 months, the stock has traded between $17.18 and $34.96.

For the three months ended March 28, Greatbatch recorded a loss of $3.4 million, or 15 cents per share, compared with earnings of $10.7 million, or 43 cents per share, in the year-ago period.

On an adjusted basis, excluding acquisition-related charges and other one-time items, the company reported income of $3.6 million, or 16 cents per share, compared with $8.8 million, or 36 cents per share, in the first quarter of last year.

Analysts polled by Thomson Financial, on average, expected earnings of 26 cents per share on sales of $114.4 million. Analyst estimates typically exclude one-time, unusual items.

Sales rose 59 percent to $122.2 million from $76.9 million in the 2007 quarter. Sales excluding the acquisitions for the first quarter fell 8 percent, due in part to lower sales of coated components, the company said.

The cost of sales nearly doubled to $98.5 million, because of increased manufacturing costs at its newly acquired companies, Greatbatch said.

The company has completed seven acquisitions in the past 12 months.

Nonetheless, Canaccord Adams analyst Jason R. Mills maintained a "Buy" rating and a $25 target price on the stock, noting the currently low. Mills said he would not recommend the stock for short-term investors but that Greatbatch presents an attractive long-term investment opportunity.

"We are concerned about near-term potential for facility integration snafus that could delay cost containment, and thus margin expansion," Mills said in a note to clients. "However we do think Greatbatch could be more attractive for long-term investors with a time horizon greater than 12 months as we expect management to unlock significant value we see in the company."