ConMed DOUBLES 2024 EPS, Tariff’s Loom for 2025

ConMed not only beat Wall Street’s EPS estimates for 2024, they doubled reported EPS from $2.04 in 2023 to $4.25 for 2024. Can they keep the momentum going? 

Starting with the fourth quarter ending December 2024, ConMed reported $345.9 million in sales and $52.5 million in operating profit which was also better than Wall Street expected, but in line with management’s guidance—which tells you how little credit Wall Street is giving CNMD these days.

For all of 2024, ConMed’s sales were $1.307 billion, which was 5% higher than the year before. The operating profit for the year was a respectable $200 million.

Nice Bounce Back After a Disappointing 2024

Pat Beyer, ConMed’s president and CEO told Wall Street analysts that the fourth quarter’s year-over-year sales growth amounted to 5.8% as reported and 6% in constant currency. “This performance was generally in line with our expectations and financial guidance,” he added.

ConMed’s Q4 GAAP net income was $33.8 million versus $33.1 million for the same period in 2023.

Full year sales were $1.307 billion, up 5%. Q4 orthopedic sales increased 2.4%, full year ortho sales rose 2.5% on a constant currency business. General surgery Q4 sales rose 8.7%, constant currency, and 7.5% for the full year.

Beyer added, “Air Seal has another year of strong double-digit growth, with record capital and disposable sales despite the change in market dynamics. While our overall sales growth in 2024 was below our potential of our portfolio, we were able to offset some of the top line headwind with improving profitability, driven by product mix and operating leverage.”

Managing Expectations for 2025

“Turning to 2025, we are laser-focused on resolving the remaining supply challenges for our Orthopedic business and strengthening our operations, while maximizing the potential of our key growth drivers, including AirSeal, Buffalo Filter, BioBrace and our Foot & Ankle portfolio. We made progress on our supply challenges throughout 2024, but not as quickly as we had planned.”

Beyer explained that they hired a consulting firm to help them improve operations more rapidly.

Todd Garner, executive vice president, and chief financial officer, added, “We are intensely focused on turning our 2024 challenges into strength in 2025. Despite those challenges, the strong improvement we delivered in operating margin demonstrates the long-term opportunity for this portfolio to grow faster than our peers in revenue and profitability.”

“For the full year 2025, we expect constant currency revenue growth between 4% and 6%, with currency headwind between approximately 100 and 120 basis points. Together, that places our reported revenue guidance range between $1.344 billion and $1.372 billion.

Impact of Trump’s Tariffs – Between $8 and $45 Million of Increased Costs

“For Mexico and Canada, an additional 25% tariff on the total product value crossing the border into the United States, using our current accounting and process would be a tariff increase of approximately $45 million in total. The Canadian piece of this is very small. To demonstrate the uncertainty here, even if the 25% tariff ultimately was put in place but only assigned to the value added in Mexico, the liability would decrease from $45 million to approximately $7.5 million.”

He added, “For China, Trump has announced an additional 10% to the existing tariffs with no exemptions. The existing tariffs that Trump implemented in its first term are 25%. However, Section 301 of the Trade Act exempts certain medical devices, which includes our products from China. So we are currently paying very minimal tariffs on product from China. That exemption expires at the end of May 2025, and our partners in the process believe the way the current order is worded, the exemption will continue until expiration.”

This translates to a 10% tariff beginning this month which would be about $250,000 per month. And if nothing changes, in June the tariff rate would become 35% which would be $875,000 per month.”

Wall Street Analysts Push for Clarification on Conservative Guidance

An analyst from Piper Sandler asked, “In the investor deck, you state that the aggregate ConMed growth rate is, call it, 6.5% at the midpoint. You’re guiding to a 5% constant currency this year at the midpoint. Where is that 150 basis points of delta coming from mainly?”

Garner said, “Yes, mainly, there’s frustrations that we had in 2024, right? We’ve talked about supply chain challenges that have lingered longer than we thought they would, that’s why we’ve engaged a top-tier consulting firm to help us get out of this as quick as possible. That slowed us down. That’s kept our sports medicine business from being on offense, and I would say that’s probably the biggest headwind in the near term.”

Rick Wise of Stifel asked for clarification on what they were being so conservative with guidance for 2025. Garner explained, “So we just grew 5.3% constant currency in 2024, and 2024 had an extra day. Now when you put a day on a year, it’s not very much, right? But still, we just did 5.3%.

So we’re guiding 4.6 – 4% to 6% for 2025, and that’s really where the portfolio is right now, right? So, we feel like we have to earn our way up that curve, and we expect to. If we can get sports medicine back to where it should be, we saw good signs from Foot & Ankle in Q4, they grew double digits in Q4. The General Surgery business has been durable and solid.

So if we can get the Orthopedics business back to where it’s supposed to be, then I think we can earn the right to guide higher up into that range of where we think the portfolio should be. So to be clear, we are also disappointed that we’re in this 4% to 6% range at the current time, and are anxious to prove our way to move up that in future years.”

An analyst from Needham & Company asked what Beyer’s plans for as CEO going forward.

Beyers said, “As I sit in the CEO role, I’ve been asked what’s my focus going to be. And I’ve been careful to say, step one, I’m going to ask a lot of questions. I’m not going to jump into making decisions early. And in that vein, I’m calling out six things we’re focusing on right now. And it seems a lot, but it’s really six focus areas.

“Number one, continuing to advance the clinical insufflation platform of Air Seal. That portfolio has to continue to win, number one. Number two, getting our orthopedic business back on offense through operations. Number three, continuing to be mindful of our debt and continuing to drive that leverage down. Then we have three great portfolios we have to continue to win in: BioBrace, Buffalo Filter and our Foot & Ankle space. “Now I said I want to be careful that I don’t jump in and make decisions quickly. But to make decisions for the durability, the growth and the profitability of ConMed going into the next decade, we have to review the portfolio. It’s 55 years old. And me and the leadership team and our commercial leaders are going to be looking at which spaces are ConMed in, what’s our portfolio look like, doing some natural hygiene improving where it makes sense, but all with the goal of durability and the growth and profitability of ConMed going forward.”