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Integra (IART) Q3 Earnings Top Estimates, 2021 EPS View Up

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Integra LifeSciences Holdings Corporation (IART - Free Report) delivered adjusted earnings per share (EPS) of 86 cents in the third quarter of 2021, up 7.5% from a year ago. The metric surpassed the Zacks Consensus Estimate by 19.4%.

The adjustment excludes the impact of certain non-recurring charges like divestiture, acquisition and integration, intangible asset amortization expenses and EU Medical Device Regulation charges, among others.

GAAP EPS for the third quarter was 51 cents compared with 38 cents in the year-ago quarter.

Revenue Discussion

Total revenues in the reported quarter improved 4.5% year over year to $386.9 million. The metric exceeded the Zacks Consensus Estimate by 0.5%. Organically, revenues improved 6.7% year over year.

Total reported revenues include $16.8 million from the acquisition of ACell, which was completed on Jan 20, 2021.

Notably, the quarter’s figure was in line with the company’s third-quarter sales estimate of $382-$389 million announced in July.

Segmental Details

Coming to product categories, revenues from the Codman Specialty Surgical (“CSS”) segment rose 7.2% year over year on a reported basis to $256.5 million (organically, up 8%). This improvement can be attributed to 6% growth in global neurosurgery as well as 15% growth in instruments year over year on an organic basis. Instruments sales benefited from a robust recovery in order demand. Meanwhile, strength in Neurosurgery was broad-based, including sales of the newly-launched CereLink ICP Monitor System. The segment also saw growth in international sales across all major regions compared to the prior year.

Tissue Technologies revenues totaled $130.4 million in the third quarter, down 0.4% year over year on a reported basis but up 3.7% on an organic basis. This organic growth was led by strength in burn, trauma and surgical reconstruction. During the third quarter, sales in wound reconstruction improved 1.7% on an organic basis year over year, led by Integra Skin and SurgiMend. Sales in private label increased 9% year over year owing to continued recovery in customer orders.

Margin Trend

In the reported quarter, gross profit totaled $242.4 million, up 2.9% year over year. Yet, gross margin contracted 93 basis points (bps) to 62.7%. The company-adjusted gross margin of 68.3% contracted 30 bps.

Selling, general and administrative expenses surged 3.9% to $156 million in the quarter under review, while research and development expenses rose 32.7% to $25.8 million.

Overall, adjusted operating profit was $60.6 million, down 8.1% year over year. Adjusted operating margin saw a 214-bp contraction year over year to 15.7%.

Financial Position

Integra exited the third quarter of 2021 with cash and cash equivalents of $470.2 million, up from $397.4 million at the end of second-quarter 2021.

Cumulative net cash flow from operating activities at the end of the third quarter was $243.2 million compared with $123.6 million in the year-ago period.

2021 Outlook

The company has updated its financial guidance for 2021, taking into account pandemic-related uncertainty across all markets and product lines.

For 2021, the company has reaffirmed its earlier-projected revenue guidance at the band of $1.54-$1.55 billion. However, it expects to report at the low end of this range. The Zacks Consensus Estimate for the same is pegged at 1.54 billion.

The company expects to report adjusted earnings per diluted share in the band of $3.16 to $3.20 for 2021, improving from the previously announced range of $2.98 to $3.05.The Zacks Consensus Estimate for the same is pegged at $3.15.

Q4 Outlook

For the fourth quarter of 2021, Integra expects revenues of $403 million, reflecting 3.5% growth on a reported basis and 6.5% growth on an organic basis. The Zacks Consensus Estimate for the same is pegged at 404.5 million.

Adjusted earnings per share are estimated in the range of 82 cents to 86 cents, the Zacks Consensus Estimate for which is pegged at 84 cents.

Our Take

Integra exited the third quarter of 2021 on a bullish note with better-than-expected earnings and revenues. The year-over-year growth in CSS segment buoys optimism. Sales from CereLink ICP Monitor System and SurgiMend raise confidence. Robust uptake of the company’s products is also a positive. An improvement in short-term cash level looks encouraging. Further, the company raised its EPS guidance for 2021.

However, the increase in operating expenses is concerning. A year-over-year decline in Tissue Technologies arm raises concern. Contraction of both margins and decline in adjusted operating profits are other disadvantages.

Zacks Rank & Key Picks

Integra currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Bio-Rad Laboratories, Inc. (BIO - Free Report) , Laboratory Corporation of America Holdings or LabCorp (LH - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) .

Bio-Rad, carrying a Zacks Rank #2 (Buy), reported third-quarter 2021 adjusted EPS of $3.71, which beat the Zacks Consensus Estimate by 61.3%. Revenues of $747 million outpaced the consensus mark by 11.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LabCorp reported third-quarter 2021 adjusted EPS of $6.82, surpassing the Zacks Consensus Estimate by 42.9%. Revenues of $4.06 billion surpassed the Zacks Consensus Estimate by 13.4%. It currently carries a Zacks Rank #2.

West Pharmaceutical reported third-quarter 2021 adjusted EPS of $2.06, which surpassed the Zacks Consensus Estimate by 13.2%. Revenues of $706.5 million outpaced the Zacks Consensus Estimate by 3.2%. It currently carries a Zacks Rank #2.