A month has gone by since the last earnings report for Integra LifeSciences (IART). Shares have lost about 1.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Integra due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Integra's Q3 Earnings Top Estimates, Gross Margin Down
Integradelivered adjusted earnings per share of 41 cents for the third quarter of 2024, a 46.1% plunge year over year. The metric, however, surpassed the Zacks Consensus Estimate by 5.1%.
The adjustment excludes the impact of certain non-recurring charges like structural optimization charges, the Boston recall/Braintree transition and EU Medical Device Regulation charges among others.
GAAP loss per share in the third quarter was 14 cents against GAAP earnings per share of 24 cents in the year-ago quarter.
Revenue Discussion
Total revenues in the reported quarter fell 0.4% year over year to $380.8 million. The metric topped the Zacks Consensus Estimate by 1.3%. Organically, revenues declined 8.6% year over year. Revenues decreased 10.3% on an organic basis, excluding the Boston manufacturing plant’s production.
Segmental Details
Coming to product categories, revenues in the Codman Specialty Surgical segment rose 1% year over year on a reported basis (organically, down 10.7%) to $270.8 million. The downside can be attributed to a 16% decline in Neurosurgery sales on an organic basis, primarily due to temporary shipping holds in CSF management and Neuro monitoring as well as supply challenges in Dural access and repair.
However, the company reported mid-single-digit growth in Advanced Energy, driven by CUSA capital and CUSA disposables.
Instruments within CSS grew 8.7% on an organic basis. ENT sales too grew substantially, banking on the Acclarent acquisition
Tissue Technologies revenues totaled $110.1 million in the third quarter, down 3.6% year over year on a reported basis and 3.7% on an organic basis. Excluding the company’s products manufactured in Boston, Tissue Technologies sales declined 9.4% year over year.
The downside was due to the impact of a low double-digit decline in Integra Skin due to production challenges. However, the company reported low double-digit growth in DuraSorb, MicroMatrix and Cytal. Sales in private label grew 13.3% Organically.
Margin Trend
In the reported quarter, gross profit totaled $200.2 million, down 8.3% year over year. The gross margin contracted 452 basis points (bps) to 52.6%.
Selling, general and administrative expenses increased 9.4% to $177.2 million in the quarter under review, while research and development expenses rose 3.2% to $27.4 million.
Overall, adjusted operating loss was $4.4 million against adjusted operating profit of $29.8 million a year ago.
Financial Position
Integra exited third-quarter 2024 with cash and cash equivalents and short-term investments of $277.6 million, down from $297 million at the end of second-quarter 2024.
Cumulative net cash flow from operating activities at the end of the third quarter of 2024 was $78.6 million compared with $81.2 million a year ago.
Guidance
The company updated its financial guidance for 2024.
For 2024, IART now projects revenues in the band of $1.609 billion-$1.619 billion (compared with the previous guidance of $1.61 billion-$1.63 billion). This suggests reported growth of 4.4 and organic decline of 1% to 1.7%. The Zacks Consensus Estimate for the same is pegged at $1.61 billion.
The company projects adjusted earnings per share for 2024 between $2.41 and $2.49 (tightened from the previously guided range of $2.41 and $2.57). The Zacks Consensus Estimate for the metric is pegged at $2.45.
The company also provided fourth-quarter 2024 outlook.
For the fourth quarter of 2024, Integra expects reported revenues in the range of $441 million-$451 million, suggesting reported growth of 11.1% to 13.6% and organic growth of 2% to 4.5%. The Zacks Consensus Estimate for the same is pegged at $449.9 million.
Adjusted earnings per share are expected to be in the range of 81-89 cents. The Zacks Consensus Estimate for the metric is pegged at 88 cents.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Integra has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Integra has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Integra belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, DexCom (DXCM), has gained 17.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
DexCom reported revenues of $994.2 million in the last reported quarter, representing a year-over-year change of +2%. EPS of $0.45 for the same period compares with $0.50 a year ago.
DexCom is expected to post earnings of $0.52 per share for the current quarter, representing a year-over-year change of +4%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.5%.
DexCom has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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