The Action At Medical Action

The current AIDS crisis and widening fear of infectious diseases have been a boon to Medical Action Industries. Why? The company is a major maker of disposable surgical-related products, such as operating-room sponges and towels, as well as gauze and burn dressings. As hospitals and clinics increase their usage of disposable products, demand for Medical Action's wares will grow, says analyst Stuart Linde of Fahnestock. He figures that Medical Action is now "on the verge of posting quantum sales and earnings growth," after suffering huge losses in 1990 and 1991.

Earnings slumped in those years when the company's towel imports from China got squeezed by a drastic change in import quotas. Chairman and CEO Joseph Meringola acted quickly by building a factory in Asheville, N.C., that churned out Medical Action's own products. It helped the company get back into the black. Linde sees earnings of 25 cents a share in fiscal 1993 and 40 cents in fiscal 1994, up from 6 in the year ended Mar. 31, 1992.

Part of the demand for Medical Action's supplies comes from an $11 million contract with Baxter International for disposable sponge products. Whispers are that Medical Action will soon get a new order of similar size from another major medical company. So Linde figures sales will jump to $45 million in 1994 from 1993's estimated $36 million and 1992's $27 million.

Meanwhile, Medical Action's stock has been on the rise, climbing from 2 3/4 a share in early October to 3 7/8 now. Linde thinks that the stock could double in a year.

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