Vital Signs shares dip on Piper Jaffray downgrade

Shares fell $4.07, or 7.3 percent, to $51.37 in afternoon trading. The stock has traded between $45.06 to $61.20 over the last 52 weeks.

PiperJaffray analyst Mark J. Mullikin downgraded the stock, but also increased his 12-month price target to $59 from $58.

Last week, the company said its fiscal 2008 second-quarter profit rose 16 percent, to just over $10 million, or 75 cents per share, compared with profit of $8.6 million, or 65 cents per share, during the same period a year prior. Revenue rose 12 percent to $58.9 million from $52.6 million.

Analysts polled by Thomson Financial expected profit of 69 cents per share.

During the quarter, which ended March 31, sales of anesthesia products rose 5 percent to $19.8 million while critical care product sales rose 3 percent to $12.3 million. Sleep and ventilation product sales rose 37 percent to $16.6 million while cardiology product sales rose 4 percent to $7.2 million.

Pharmaceutical technology product sales rose 8 percent to $3 million.

The results topped Mullikin's forecast, but he called the company's new full-year outlook conservative. Vital Signs raised guidance to between $2.82 and $2.88 per share, up from $2.80 to $2.85 per share.

He said it appears the company is sacrificing leverage in order to spend to ensure future growth. Higher expenses will include a sales force expansion, marketing expenses associated with new product launches and increases in research and development.