Integra LifeSciences Holdings Corporation IART is likely to grow in the coming quarters, given the healthy demand for its industry-leading products within Codman Specialty Surgical (“CSS”). The company’s favorable solvency is highly optimistic. The performance of the key product categories within Tissue Technologies also bodes well for Integra. However, macroeconomic headwinds and competitive disadvantages may dent the company’s results of operations, which remains a concern.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 25.3% compared with the industry’s 0.6% fall and the 21.1% increase of the S&P 500 composite.
The renowned medical device company has a market capitalization of $3.39 billion. Integra has an earnings yield of 7.85% against the industry’s yield of -4.96%. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 5.8%.
Let’s delve deeper.
Tailwinds
Strong Prospects of the CSS Segment: The segment is benefiting from the growing market acceptance of the company’s global neurosurgery line-ups, including CSS management and neuromonitoring. Within CSS management, Integra is experiencing growth, banking on the strong market adoption of programmable valves and advanced energy (key revenue-generating products are CUSA Capital, Mayfield, DuraGen, Certas Plus programmable valves, Bactiseal catheters and instruments).
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The company has expanded the international reach of the CUSA platform and registered DuraGen, DuraSeal, Mayfield and Duo LED lighting in the EMEA and Latin America. The company also launched DuraGen Plus in China. In CereLink, Integra has made progress in resolving the electrical interference issue in its monitors and relaunched it in the international market in the third quarter of 2023.
Decent Sales Projections Within Tissue Technologies: Post the COVID-19-induced dismal 2020 performance, Integra's Tissue Technologies business is continuously gaining traction on efficient growth strategies and a better price management policy. The wound reconstruction subcategory within Tissue Technologies is rebounding fast, banking on robust sales in Integra Skin and SurgiMend. The ACell franchise is driving better results too.
In the Tissue Technologies division, the company launched NeuraGen 3D, a unique mid-cap nerve repair product. Despite the product recall and subsequent manufacturing pause in Boston during the third quarter of 2023, the company is showing strength in Tissue Technologies banking, particularly on key product lines like MicroMatrix, Cytal and MediHoney.
Favorable Solvency: At the end of the third quarter of 2023, Integra reported cash and cash equivalents of $274 million against $94 million of short-term payable debt, indicating a sound financial position. As of Sep 30, 2023, the company had a total debt (including the current portion) of $1.51 billion on the balance sheet.
Headwinds
Rising SG&A Expenses May Strain Margins: Higher freight costs, ongoing labor inflation, and manufacturing and supply-chain inefficiencies have continued to put significant pressure on Integra’s margins in recent times. Integra’s SG&A expenses rose 12.6% during the third quarter of 2023. In the quarter, an unfavorable product and geographic mix and Boston recall issue-related expenses laid significant pressure on the company’s margins.
Competition: Integra faces significant competition in the surgical implant and medical instrument market. The company needs to be innovative on the product front to keep up with the competition. In addition, the company competes with many smaller specialized companies and larger companies that do not otherwise focus on specialty surgical solutions.
Estimate Trend
The Zacks Consensus Estimate for 2023 earnings per share (EPS) has remained constant at $3.10 in the past 30 days.
The consensus estimate for the company’s 2023 revenues is pegged at $1.56 billion. This suggests a 0.12% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, DaVita DVA and HealthEquity HQY.
Haemonetics has an estimated earnings growth rate of 28.4% for fiscal 2024 compared with the industry’s 15.3%. HAE’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 16.1%. Its shares have increased 0.4% against the industry’s 0.1% fall in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita, sporting a Zacks Rank #1 at present, has a long-term estimated earnings growth rate of 17.3% compared with the industry’s 11.3%. Shares of the company have increased 35.9% compared with the industry’s 10.4% rise over the past year.
DVA’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.6%. In the last reported quarter, it delivered an average earnings surprise of 48.4%.
HealthEquity, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 27.5% compared with the industry’s 13.9%. Shares of HQY have increased 23% against the industry’s 6.6% decline over the past year.
HQY’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 16.5%. In the last reported quarter, it delivered an average earnings surprise of 22.5%.
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