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Integer Holdings (ITGR) Q2 Earnings Miss Estimates, Down Y/Y

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Integer Holdings Corporation (ITGR - Free Report) reported second-quarter 2020 adjusted earnings per share (EPS) of 32 cents, which missed the Zacks Consensus Estimate of 40 cents by 20%. The bottom line also plunged 73.9% on a year-over-year basis.

Revenues declined 23.6% year over year to $240.1 million on a reported basis. However, the top line beat the Zacks Consensus Estimate by 1.9%.

Segmental Analysis

Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.

Medical Sales

At the segment, reported revenues were $231.4 million, down 22.2% year over year. Revenues declined 22.8% from the prior-year quarter on an organic basis.

Medical Sales has three sub-segments — Advanced Surgical, Orthopedics and Portable Medical (AS&O); Cardio & Vascular; and Cardiac & Neuromodulation.

Advanced Surgical, Orthopedics and Portable Medical

Integer Holdings’ Advanced Surgical, Orthopedics & Portable Medical segment has been divested to Viant. Consequently, revenues at the segment comprise net sales from acquirer Viant under supply agreements associated with the divestiture.

Revenues amounted to $30.6 million, down 6.2% year over year and 6.1% on an organic basis. Per management, the downside can be attributed to the impact of the COVID-19 pandemic and a blend of customers’ responses. However, higher demand for ventilator and patient monitoring components partially offset the downside.

Cardio & Vascular

Revenues at the segment totaled $129.1 million, down 14.2% from the prior-year quarter and 15.2% organically. Per management, this was owing to the impact of the pandemic and their customers’ responses throughout nearly all Cardio & Vascular markets.

Cardiac & Neuromodulation

Revenues at this segment totaled $71.7 million, declining 37.4% on both year-over-year and organic basis. This was due to Nuvectra bankruptcy ($7 million) and decline in CRM and Neuromodulation (keeping with the market impact and a blend of customers’ responses).

Non-Medical Sales

Reported revenues at the segment totaled $8.7 million, down 47.6% on both year-over-year and organic basis.

Margin Analysis

Integer Holdings generated a gross profit of $57.9 million in the second quarter, down 40.3% year over year. As a percentage of revenues, gross margin in quarter contracted 680 basis points (bps) to 24.1%.

Selling, general and administrative expenses (SG&A) were $33.9 million, up 2.3% year over year.

Research, development and engineering costs were $12.7 million in the quarter, up 11.8% year over year.

Total operating income amounted to $9.2 million, which plunged 81.4% year over year.

Operating margin in the quarter under review was 3.8%, down 1190 bps year over year.

2020 Guidance

The company has refrained from providing full-year 2020 guidance on account of the continued uncertainty surrounding the impact and recovery period of the COVID-19 pandemic.

Summing Up

Integer Holdings exited the second quarter on a mixed note, wherein earnings missed the Zacks Consensus Estimate, while revenues beat the same. The company witnessed weak performance across its segments in the quarter under review. Also, contraction in both gross and operating margins is a dampener.

Nonetheless, strong demand across key areas like structural heart is a tailwind. Further, higher demand for ventilator and patient monitoring components buoy optimism.

Zacks Rank

Currently, Integer Holdings carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the broader medical space are Thermo Fisher Scientific Inc. (TMO - Free Report) , PerkinElmer, Inc. (PKI - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

PerkinElmer reported second-quarter 2020 adjusted EPS of $1.57, surpassing the Zacks Consensus Estimate by 68.8%. Revenues of $811.7 million outpaced the consensus mark by 1.3%.

West Pharmaceuticals reported second-quarter 2020 adjusted EPS of $1.25, outpacing the Zacks Consensus Estimate of 91 cents. Revenues of $527.2 million surpassed the consensus estimate by 6.9%. 

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