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Integer Holdings (ITGR) Q4 Earnings Beat Estimates, Margins Up
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Integer Holdings Corporation (ITGR - Free Report) reported adjusted earnings per share (EPS) of $1.11 in the fourth quarter of 2022, which improved 12.1% year over year. The figure topped the Zacks Consensus Estimate by 5.7%.
The adjustments include expenses related to the amortization of intangible assets, and restructuring and restructuring-related charges, among others.
Our projection of adjusted EPS was $1.00.
GAAP EPS for the quarter was 51 cents, reflecting a plunge of 15% year over year.
Full-year adjusted EPS was $3.88, down 4.9% compared to the end of 2021. Our projection of full-year adjusted EPS was $3.77.
Revenues in Detail
Integer Holdings registered revenues of $372.4 million in the fourth quarter, up 18.9% year over year. The figure surpassed the Zacks Consensus Estimate by 1.6%.
Organically, revenues increased 13.4%.
The fourth-quarter revenue compares to our estimate of $361.6 million.
Robust segmental performances drove the company’s top line in the reported period.
Full-year revenues were $1.38 billion, reflecting a 12.7% improvement from the comparable 2021 period. Organically, revenues increased 6.5%.
Our projection of full-year revenues was $1.37 billion.
Segmental Analysis
Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.
Medical Sales reported revenues of $356.8 million, up 18.2% year over year on a reported and 12.4% on an organic basis.
This figure compares to our Medical Sales fourth-quarter projection of $350.1 million.
Medical Sales has three product lines — Advanced Surgical, Orthopedics & Portable Medical (AS&O); Cardio & Vascular; and Cardiac Rhythm Management & Neuromodulation.
Integer Holdings’ AS&O revenues amounted to $28.4 million, up 32.3% year over year on a reported and 32.4% on an organic basis. Per management, this resulted from higher demand and price achievement from the start of the multi-year portable medical exit that the company announced in 2021.
Revenues at the Cardio & Vascular business totaled $185.7 million, up 19.8% from the prior-year quarter on a reported basis and up 13.1% organically. The strong year-over-year performance was driven by strong organic demand across all markets, especially the structural heart and key products (such as guidewires) and incremental sales from Oscor and Aran acquisitions. The business also benefited from the improved delivery performance from the complex catheter supplier that negatively impacted the third quarter of 2022.
Revenues at the Cardiac Rhythm Management & Neuromodulation business were $142.7 million, up 13.7% year over year on a reported and up 8.1% on an organic basis. The business was driven by sales growth in Oscor and improved supplier delivery performance compared with the prior-year period, particularly for neuromodulation products.
This compares to our fourth-quarter projections of $26.3 million, $186 million and $137.7 million, respectively, for each of the product lines.
Revenues in the Non-Medical segment totaled $15.6 million, up 40.9% year over year. This was driven by strong sales at the Electrochem product line, part of the Non-Medical segment, across all market segments and supplier delivery recovery.
This figure compares to our segmental projection of $11.5 million for the fourth quarter.
Integer Holdings Corporation Price, Consensus and EPS Surprise
Integer Holdings generated a gross profit of $97.9 million in the fourth quarter, up 19.6% year over year. The gross margin in the reported quarter expanded 14 basis points (bps) to 26.3%.
We had projected a 27.5% of gross margin for the fourth quarter.
Selling, general and administrative expenses were $41 million, up 13.1% year over year. Research, development and engineering costs were $13.8 million in the quarter, up 8.7% year over year. Adjusted operating expenses of $54.9 million increased 11.9% year over year.
Adjusted operating profit totaled $43 million, reflecting a 30.9% uptick from the prior-year quarter. Adjusted operating margin in the fourth quarter expanded 106 bps to 11.6%.
Financial Position
Integer Holdings exited the full-year 2022 with cash and cash equivalents of $24.3 million compared with $17.9 million at the end of 2021. Total debt (including the current portion) at the end of the full-year 2022 was $925.3 million compared with $828.1 million at the end of 2021.
Cumulative net cash flow from operating activities at the end of 2022 was $116.4 million compared with $156.7 million a year ago.
2022 Guidance
Integer Holdings has initiated its financial outlook for the full-year 2023.
For 2023, the company expects revenues in the range of $1,470 million-$1,500 million (suggesting an improvement of 7-9% from the 2022 reported figure). The Zacks Consensus Estimate for the same is pegged at $1.49 billion.
The company expects full-year adjusted EPS to be in the band of $4.00-$4.30 (suggesting a rise of 3-11% from the 2022 reported figure). The Zacks Consensus Estimate for the same is pegged at $4.22.
Our Take
Integer Holdings exited the fourth quarter of 2022 with better-than-expected results. The strong year-over-year top-line and bottom-line performances are impressive. Robust performances by both segments and strength in all three product lines of the Medical Sales segment are encouraging. Continued benefits from the Oscor and Aran acquisitions look promising. The expansion of both margins bodes well for the stock.
Integer Holdings’ strong product development pipeline in high-growth markets, emerging customer product launches, successful tuck-in acquisitions and underlying strength of existing programs also look promising for the stock.
However, the company’s business was continued to be widely hampered by challenging labor and supply chain environment, which raised our apprehension.
Zacks Rank and Stocks to Consider
Integer Holdings currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Cardinal Health, Inc. (CAH - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Cardinal Health, carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
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Integer Holdings (ITGR) Q4 Earnings Beat Estimates, Margins Up
Integer Holdings Corporation (ITGR - Free Report) reported adjusted earnings per share (EPS) of $1.11 in the fourth quarter of 2022, which improved 12.1% year over year. The figure topped the Zacks Consensus Estimate by 5.7%.
The adjustments include expenses related to the amortization of intangible assets, and restructuring and restructuring-related charges, among others.
Our projection of adjusted EPS was $1.00.
GAAP EPS for the quarter was 51 cents, reflecting a plunge of 15% year over year.
Full-year adjusted EPS was $3.88, down 4.9% compared to the end of 2021. Our projection of full-year adjusted EPS was $3.77.
Revenues in Detail
Integer Holdings registered revenues of $372.4 million in the fourth quarter, up 18.9% year over year. The figure surpassed the Zacks Consensus Estimate by 1.6%.
Organically, revenues increased 13.4%.
The fourth-quarter revenue compares to our estimate of $361.6 million.
Robust segmental performances drove the company’s top line in the reported period.
Full-year revenues were $1.38 billion, reflecting a 12.7% improvement from the comparable 2021 period. Organically, revenues increased 6.5%.
Our projection of full-year revenues was $1.37 billion.
Segmental Analysis
Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.
Medical Sales reported revenues of $356.8 million, up 18.2% year over year on a reported and 12.4% on an organic basis.
This figure compares to our Medical Sales fourth-quarter projection of $350.1 million.
Medical Sales has three product lines — Advanced Surgical, Orthopedics & Portable Medical (AS&O); Cardio & Vascular; and Cardiac Rhythm Management & Neuromodulation.
Integer Holdings’ AS&O revenues amounted to $28.4 million, up 32.3% year over year on a reported and 32.4% on an organic basis. Per management, this resulted from higher demand and price achievement from the start of the multi-year portable medical exit that the company announced in 2021.
Revenues at the Cardio & Vascular business totaled $185.7 million, up 19.8% from the prior-year quarter on a reported basis and up 13.1% organically. The strong year-over-year performance was driven by strong organic demand across all markets, especially the structural heart and key products (such as guidewires) and incremental sales from Oscor and Aran acquisitions. The business also benefited from the improved delivery performance from the complex catheter supplier that negatively impacted the third quarter of 2022.
Revenues at the Cardiac Rhythm Management & Neuromodulation business were $142.7 million, up 13.7% year over year on a reported and up 8.1% on an organic basis. The business was driven by sales growth in Oscor and improved supplier delivery performance compared with the prior-year period, particularly for neuromodulation products.
This compares to our fourth-quarter projections of $26.3 million, $186 million and $137.7 million, respectively, for each of the product lines.
Revenues in the Non-Medical segment totaled $15.6 million, up 40.9% year over year. This was driven by strong sales at the Electrochem product line, part of the Non-Medical segment, across all market segments and supplier delivery recovery.
This figure compares to our segmental projection of $11.5 million for the fourth quarter.
Integer Holdings Corporation Price, Consensus and EPS Surprise
Integer Holdings Corporation price-consensus-eps-surprise-chart | Integer Holdings Corporation Quote
Margin Analysis
Integer Holdings generated a gross profit of $97.9 million in the fourth quarter, up 19.6% year over year. The gross margin in the reported quarter expanded 14 basis points (bps) to 26.3%.
We had projected a 27.5% of gross margin for the fourth quarter.
Selling, general and administrative expenses were $41 million, up 13.1% year over year. Research, development and engineering costs were $13.8 million in the quarter, up 8.7% year over year. Adjusted operating expenses of $54.9 million increased 11.9% year over year.
Adjusted operating profit totaled $43 million, reflecting a 30.9% uptick from the prior-year quarter. Adjusted operating margin in the fourth quarter expanded 106 bps to 11.6%.
Financial Position
Integer Holdings exited the full-year 2022 with cash and cash equivalents of $24.3 million compared with $17.9 million at the end of 2021. Total debt (including the current portion) at the end of the full-year 2022 was $925.3 million compared with $828.1 million at the end of 2021.
Cumulative net cash flow from operating activities at the end of 2022 was $116.4 million compared with $156.7 million a year ago.
2022 Guidance
Integer Holdings has initiated its financial outlook for the full-year 2023.
For 2023, the company expects revenues in the range of $1,470 million-$1,500 million (suggesting an improvement of 7-9% from the 2022 reported figure). The Zacks Consensus Estimate for the same is pegged at $1.49 billion.
The company expects full-year adjusted EPS to be in the band of $4.00-$4.30 (suggesting a rise of 3-11% from the 2022 reported figure). The Zacks Consensus Estimate for the same is pegged at $4.22.
Our Take
Integer Holdings exited the fourth quarter of 2022 with better-than-expected results. The strong year-over-year top-line and bottom-line performances are impressive. Robust performances by both segments and strength in all three product lines of the Medical Sales segment are encouraging. Continued benefits from the Oscor and Aran acquisitions look promising. The expansion of both margins bodes well for the stock.
Integer Holdings’ strong product development pipeline in high-growth markets, emerging customer product launches, successful tuck-in acquisitions and underlying strength of existing programs also look promising for the stock.
However, the company’s business was continued to be widely hampered by challenging labor and supply chain environment, which raised our apprehension.
Zacks Rank and Stocks to Consider
Integer Holdings currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Cardinal Health, Inc. (CAH - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Cardinal Health, carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.