Integra LifeSciences Holdings Corporation (IART Quick QuoteIART - Free Report) has been registering robust performances across its Codman Specialty Surgical (“CSS”) and Tissue Technologies segments.

The company exited fourth-quarter 2021 with better-than-expected results. Robust performances across all geographies buoy optimism. Further, the upbeat financial guidance for 2022 instills investor confidence. However, tough competition and foreign-exchange headwinds are concerning.

Over the past year, the Zacks Rank #3 (Hold) stock has declined 4% compared with the 7.4% fall of the industry. This compares unfavorably with a 7.2% rise of the S&P 500.

The renowned medical device company has a market capitalization of $5.40 billion. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 15.4%.

Over the past five years, the company registered earnings growth of 12.6%, ahead of the industry’s 8.8% upsurge and the S&P 500’s 2.8% increase. Integra’s long-term projected rise of 9.4% compares with growth projections of 14.8% for the industry and 11.4% for the S&P 500.

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Let’s delve deeper.

Factors At Play

Q4 Upsides: Integra exited the fourth quarter on a bullish note, with better-than-expected earnings and revenues. Total revenues in the fourth quarter represented an increase of 8.3% on an organic basis. The top line was driven by organic growth in the company’s CSS and Tissue Technologies segments.
Geographically, sales in the United States grew in the high-single digits and international sales grew in the low-double digits from 2020. The company’s 2022 financial guidance, citing robust year-over-year growth, is encouraging.

Strong Prospects in CSS Arm: We are upbeat about Integra’s CSS segment, which registered year-over-year revenue growth of 6.4% on a reported basis in the fourth quarter. The improvement can be attributed to equal contribution from both neurosurgery and instruments. The recovery in global neurosurgery sales was broad-based, and sales and instruments continued to benefit from the pent-up demand.

Integra also registered continued growth contributions from the launch of CereLink in the United States and Europe. International sales for the CSS segment increased year over year across all major regions.

Tissue Technologies Holds Potential: Integra's Tissue Technologies grew 6.7% on an organic basis in the fourth quarter. Sales in wound reconstruction improved 3.8% year over year on an organic basis, led by Integra Skin and SurgiMend in the company’s burn, trauma and surgical reconstruction markets.

The ACell business stabilized in the reported quarter, delivering $16.9 million in sales. The figure was in line with the November guidance, thereby raising optimism. Sales in private label increased 15% from 2020, driven by the continued recovery in customer orders.

Downsides

COVID-Led Impacts Dent Sales: The emerging new and more contagious strains of COVID-19 can disrupt Integra’s performance down the line.

On its fourth-quarter earnings call, the company noted that the impacts of the Delta and Omicron variants of COVID-19, and hospital staffing shortages resulted in procedural deferrals in parts of the globe.

Tough Competition Threatens Growth: Integra faces significant competition in the surgical implants and medical instruments markets. The company needs to be innovative on the product front in order to keep up with the competition. Consolidation trends in the industry could lead to intense pricing pressure and further competition.

Foreign Exchange Woes Remain: Integra generates significant revenues outside the United States, a portion of which are U.S. dollar-denominated transactions conducted with customers who generate revenues in currencies other than the U.S. dollar.

As a result, currency fluctuations between the U.S. dollar and the currencies in which customers do business may impact the demand for the company's products in foreign countries.

Estimate Trend

Integra has been witnessing a positive estimate revision trend for 2022. Over the past 90 days, the Zacks Consensus Estimate for the company’s earnings has moved south by 3.5% to $3.30.

The Zacks Consensus Estimate for fourth-quarter 2021 revenues is pegged at $1.59 billion, suggesting a 3.04% rise from the 2020 reported number.

Key Picks

A few better-ranked stocks in the broader medical space are Henry Schein, Inc. (HSIC Quick QuoteHSIC - Free Report) , McKesson Corporation (MCK Quick QuoteMCK - Free Report) and AmerisourceBergen Corporation .

Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Henry Schein has outperformed the industry over the past year. HSIC has gained 27.7% compared with the industry’s 4.8% rise over the past year.

McKesson has a long-term earnings growth rate of 11.8%. McKesson’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 20.6%, on average. It presently carries a Zacks Rank #2.

McKesson has outperformed the industry over the past year. MCK has gained 56.5% against 4.8% industry growth in the said period.

AmerisourceBergen has a long-term earnings growth rate of 8.2%. In the trailing four quarters, the company’s earnings surpassed estimates thrice and missed once, delivering an average surprise of 2.3%. The company currently has a Zacks Rank #2.

AmerisourceBergen has outperformed its industry in the past year. It has gained 33.6% versus the industry’s 4.8% rise.