Adams Harkness Cuts Vital Signs to 'Market Perform'

Analyst Ryan Rauch cites weak sales and lack of earnings visibility for the medical products maker

Adams Harkness downgraded Vital Signs (VITL ) to market perform from strong buy.

Analyst Ryan Rauch says he cut the medical products maker's rating as the 43 cents second-quarter earnings per share from continuing operations (excluding one-time charges) missed his 51 cents estimate. Rauch says weak respiratory, critical care, and diagnostic sleep sales hurt revenue, and lower-than-expected gross margins hit the bottom line. He notes the disgruntled ex-CEO is suing the company over alleged accounting violations; the lack of visibility into future earnings; and the company's continued inability to meet his expectations.

Rauch cut his $2.13 fiscal 2003 (Sep.) earnings per share estimate to $1.87, and cut the $2.42 fiscal 2004 estimate to $2.14. He also trimmed the $187 million fiscal 2003 revenue estimate to $182 million, and reduced the $208 million fiscal 2004 estimate to $200 million.

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