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Integra (IART) Q2 Earnings Surpass Estimates, Margins Fall
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Integra LifeSciences Holdings Corporation (IART - Free Report) delivered adjusted earnings per share (EPS) of 33 cents in the second quarter of 2020, down 54.8% from a year ago. The metric, however, surpassed the Zacks Consensus Estimate by a stupendous 312.5%.
The adjustment excludes the impact of certain non-recurring charges like structural optimization, acquisition and integration-related, COVID-19 and intangible asset amortization expenses, among others.
GAAP EPS for the second quarter was at a break-even level, compared with the year-ago quarter’s EPS of 34 cents.
Revenue Discussion
Total revenues in the reported quarter declined 32.6% year over year to $258.7 million. However, the metric exceeded the Zacks Consensus Estimate by 1.4%. Organically, revenues dropped 31.3% year over year.
The revenue decline can be attributed to lower surgical procedures related to COVID-19.
Notably, despite the fall in revenues due to the pandemic-led impacts, it exceeded the company’s expectation of $254-$256 million which was provided along with the preliminary results announced early last month.
Integra LifeSciences Holdings Corporation Price, Consensus and EPS Surprise
Coming to product categories, revenues from the Codman Specialty Surgical (CSS) segment fell 31.9% to $169.8 million (organically, decline was 30%). However, the segment witnessed steady monthly improvement throughout the quarter. The global neurosurgery sales were better than the segment’s average sales during the quarter. Although neurosurgery sales were down mid-single digits in June, a strong recovery in neuromonitoring, CFS management, and dural access and repair was registered as these products are used in urgent procedures.
International sales in CSS, although lower, performed better than the segment average, led by strength in Japan. Also, a more moderate impact of the pandemic and investments made over the past year in Japan (including the successful launch of DuraGen in 2019) contributed to the top line.
Orthopedics and Tissue Technologies (OTT) revenues totaled $88.9 million in the second quarter, down 33.9% year over year. Organically, the segment fell 34%. Although the OTT segment recorded a fall in revenues, it has started to recover. The recovery is being led by sales of the company’s shoulder solutions.
Margin Trend
In the reported quarter, gross profit totaled $153.2 million. Gross margin contracted 333 basis points (bps) to 59.2% on a 36.2% fall in gross profit. Per the company, adjusted gross margin was 66.2%, down 120 bps.
Selling, general and administrative expenses contracted 29.8% to $116.1 million in the quarter under review, while research and development expenses fell 15.4% to $14.9 million.
Overall, adjusted operating profit was $22.2 million, down 61.1% year over year. Adjusted operating margin saw a 628-bp contraction year over year to 8.6%.
Financial Position
Integra exited the second quarter of 2020 with cash and cash equivalents of $360.9 million, up from $357.7 million at the end of the first quarter.
Cumulative net cash flow from operating activities at the end of the second quarter was $53.9 million compared with $78 million in the year-ago quarter.
2020 Outlook
Given the current economic situation due to the pandemic, Integra is unable to assess the magnitude of its impact on its financial results. Hence, the company has not provided any financial guidance for the year.
However, the company expects third-quarter revenues to be lower than the year-ago levels due to the pandemic-led fall in non-emergent surgical procedures. Further, the company does not expect the recovery rates for all its markets and product lines to be the same, thus leading to uncertainties about revenues.
Our Take
Integra exited the second quarter with better-than-expected results. The ongoing recovery within the company’s business looks encouraging. Robust demand for the company’s products buoys optimism.
However, the disappointing overall and segmental performances due to coronavirus-led business disruptions is concerning. The contraction in both margins does not bode well. The company’s decision to not provide any financial guidance for the year is discouraging as well.
Zacks Rank and Other Key Picks
Integra currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. (WST - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and Hologic, Inc. (HOLX - Free Report) .
West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Thermo Fisher, a Zacks Rank #2 company, 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%.
Hologic reported third-quarter fiscal 2020 adjusted EPS of 75 cents, surpassing the Zacks Consensus Estimate by a stupendous 108.3%. Net revenues of $822.9 million exceeded the Zacks Consensus Estimate by 37.1%. It currently sports a Zacks Rank #1.
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With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
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Integra (IART) Q2 Earnings Surpass Estimates, Margins Fall
Integra LifeSciences Holdings Corporation (IART - Free Report) delivered adjusted earnings per share (EPS) of 33 cents in the second quarter of 2020, down 54.8% from a year ago. The metric, however, surpassed the Zacks Consensus Estimate by a stupendous 312.5%.
The adjustment excludes the impact of certain non-recurring charges like structural optimization, acquisition and integration-related, COVID-19 and intangible asset amortization expenses, among others.
GAAP EPS for the second quarter was at a break-even level, compared with the year-ago quarter’s EPS of 34 cents.
Revenue Discussion
Total revenues in the reported quarter declined 32.6% year over year to $258.7 million. However, the metric exceeded the Zacks Consensus Estimate by 1.4%. Organically, revenues dropped 31.3% year over year.
The revenue decline can be attributed to lower surgical procedures related to COVID-19.
Notably, despite the fall in revenues due to the pandemic-led impacts, it exceeded the company’s expectation of $254-$256 million which was provided along with the preliminary results announced early last month.
Integra LifeSciences Holdings Corporation Price, Consensus and EPS Surprise
Integra LifeSciences Holdings Corporation price-consensus-eps-surprise-chart | Integra LifeSciences Holdings Corporation Quote
Segmental Details
Coming to product categories, revenues from the Codman Specialty Surgical (CSS) segment fell 31.9% to $169.8 million (organically, decline was 30%). However, the segment witnessed steady monthly improvement throughout the quarter. The global neurosurgery sales were better than the segment’s average sales during the quarter. Although neurosurgery sales were down mid-single digits in June, a strong recovery in neuromonitoring, CFS management, and dural access and repair was registered as these products are used in urgent procedures.
International sales in CSS, although lower, performed better than the segment average, led by strength in Japan. Also, a more moderate impact of the pandemic and investments made over the past year in Japan (including the successful launch of DuraGen in 2019) contributed to the top line.
Orthopedics and Tissue Technologies (OTT) revenues totaled $88.9 million in the second quarter, down 33.9% year over year. Organically, the segment fell 34%. Although the OTT segment recorded a fall in revenues, it has started to recover. The recovery is being led by sales of the company’s shoulder solutions.
Margin Trend
In the reported quarter, gross profit totaled $153.2 million. Gross margin contracted 333 basis points (bps) to 59.2% on a 36.2% fall in gross profit. Per the company, adjusted gross margin was 66.2%, down 120 bps.
Selling, general and administrative expenses contracted 29.8% to $116.1 million in the quarter under review, while research and development expenses fell 15.4% to $14.9 million.
Overall, adjusted operating profit was $22.2 million, down 61.1% year over year. Adjusted operating margin saw a 628-bp contraction year over year to 8.6%.
Financial Position
Integra exited the second quarter of 2020 with cash and cash equivalents of $360.9 million, up from $357.7 million at the end of the first quarter.
Cumulative net cash flow from operating activities at the end of the second quarter was $53.9 million compared with $78 million in the year-ago quarter.
2020 Outlook
Given the current economic situation due to the pandemic, Integra is unable to assess the magnitude of its impact on its financial results. Hence, the company has not provided any financial guidance for the year.
However, the company expects third-quarter revenues to be lower than the year-ago levels due to the pandemic-led fall in non-emergent surgical procedures. Further, the company does not expect the recovery rates for all its markets and product lines to be the same, thus leading to uncertainties about revenues.
Our Take
Integra exited the second quarter with better-than-expected results. The ongoing recovery within the company’s business looks encouraging. Robust demand for the company’s products buoys optimism.
However, the disappointing overall and segmental performances due to coronavirus-led business disruptions is concerning. The contraction in both margins does not bode well. The company’s decision to not provide any financial guidance for the year is discouraging as well.
Zacks Rank and Other Key Picks
Integra currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. (WST - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and Hologic, Inc. (HOLX - Free Report) .
West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Thermo Fisher, a Zacks Rank #2 company, 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%.
Hologic reported third-quarter fiscal 2020 adjusted EPS of 75 cents, surpassing the Zacks Consensus Estimate by a stupendous 108.3%. Net revenues of $822.9 million exceeded the Zacks Consensus Estimate by 37.1%. It currently sports a Zacks Rank #1.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
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