CNMD Q3 Deep Dive: Margin Pressures and Portfolio Focus Shape Guidance

Medical tech company CONMED (NYSE:CNMD) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 6.7% year on year to $337.9 million. The company expects the full year’s revenue to be around $1.37 billion, close to analysts’ estimates. Its non-GAAP profit of $1.08 per share was 2.7% above analysts’ consensus estimates.

Is now the time to buy CNMD? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

CONMED’s third quarter results were marked by steady revenue growth in both orthopedics and general surgery, supported by continued surgeon adoption of core products like BioBrace and the AirSeal platform. Management pointed to improvements in supply chain operations, especially within orthopedics, as a factor in supporting incremental sales growth. CEO Patrick Beyer credited “expanding clinical adoption and strong surgeon engagement” for BioBrace’s performance, while also highlighting operational progress in reducing back orders and improving service levels.

Looking ahead, CONMED’s updated guidance reflects a greater emphasis on portfolio focus and operational discipline. Management expects ongoing benefits from strategic reviews aimed at sharpening capital allocation and improving margins, despite headwinds from new tariffs and inventory cost carryover. CFO Todd Garner noted, “We have communicated that we expect to save tens of millions of dollars overall,” but acknowledged that these savings will be offset by tariff pressures and operational investments. The shift from dividends to share repurchases is also intended to enhance financial flexibility as CONMED prioritizes investment in core growth areas.

Key Insights from Management’s Remarks

Management attributed growth to expanding adoption of core surgical platforms, supply chain progress, and a shift in capital allocation to align with industry peers.

• BioBrace platform momentum: The BioBrace implant, used in over 70 surgical procedures, continued to benefit from broader clinical adoption and increased surgeon engagement, with management citing its versatility in both sports medicine and foot and ankle repairs as a singular driver of orthopedic growth.
• Supply chain improvements: Operational enhancements and progress in reducing back orders led to record manufacturing volumes in orthopedics for the quarter, which management believes helped facilitate incremental sales, though they cautioned that full resolution and market share recapture will require several more quarters.
• AirSeal and Buffalo Filter strength: These general surgery platforms gained from rising legislative mandates and hospital protocol changes around surgical smoke evacuation, as well as expanded integration into minimally invasive procedures and ambulatory surgical centers (ASCs), where AirSeal’s clinical benefits—such as reduced pain and shorter hospital stays—remain key selling points.
• Strategic portfolio review: A comprehensive evaluation of product lines is underway, with early findings indicating the greatest growth potential in minimally invasive surgery, smoke evacuation, and orthopedic soft tissue repair. Management is using this process to determine where to focus future investment to maximize long-term returns.
• Capital allocation shift: The board suspended the company’s legacy dividend program in favor of a new $150 million share repurchase authorization, aiming to align more closely with industry practices and enhance flexibility for future growth investments.

Drivers of Future Performance

Looking ahead, management sees product innovation, supply chain execution, and cost discipline as key to sustaining growth amid margin headwinds from tariffs and operational investments.

• Portfolio focus and investment: Management is reallocating resources to core growth platforms, including minimally invasive surgery and key orthopedic franchises, with the expectation that these areas will drive durable revenue gains and improve return on invested capital.
• Tariffs and operational headwinds: New tariffs are expected to remain a significant margin headwind through next year, with management anticipating roughly 150 basis points of gross margin impact and a delayed recognition in financials due to inventory accounting. Operational cost improvements are forecast to partially offset these pressures.
• Supply chain and market share recovery: Continued progress in supply chain optimization is expected to gradually restore service levels and support market share gains in orthopedics. However, management cautions that the benefits will materialize over multiple quarters as customers re-engage with product lines post-backlog resolution.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will focus on (1) the pace of supply chain normalization and its effect on orthopedics market share, (2) the adoption trajectory of AirSeal and Buffalo Filter in both U.S. and international markets, and (3) tangible results from the ongoing strategic portfolio review and capital allocation changes. We will also monitor the impact of tariffs on gross margins and the company’s ability to offset these pressures through operational improvements.

CONMED currently trades at $43.94, down from $44.44 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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