Brean analyst expects euro, pricing pressure lowering outlooks for medical device makers

Ahead of the Bell: Medical Devices

NEW YORK — A weak euro will likely lead medical device makers to cut guidance for the remainder of 2010, an analyst said Wednesday.

Brean Murray Carret & Co. analyst Jose Haresco said recent weakness in the euro, the currency used by 16 European nations, and uncertainty surrounding its rebound will likely hurt revenue and profit and prompt conservative growth expectations.

“Cost-cutting in core European markets is the primary concern as we reevaluate many of our estimates,” he said, in a note to investors.

Core European markets, including Germany and the U.K., have already announced intentions to rein in spending over the next few years. He said France, Italy, and the Nordic countries represent other major markets that will be watched as the continent deals with the a debt crisis.

Meanwhile, he expects increased pricing pressure on medical device companies, especially in the spinal and orthopedic care markets.

“In some countries like the U.K., we expect to see those pressures in the fourth quarter of 2010 as the fiscal 2011 budget kicks in,” he said.

Some companies, though, may be able to remain upbeat about the euro, including Volcano Corp. and American Medical Systems Holdings Inc. Those companies accounted for euro pressure in their guidance, he said. Also, NuVasive Inc. gets 90 percent of its revenue in the U.S., and is likely to remain immune to any pricing pressure in the European Union.