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Here's Why You Should Hold on to Teleflex (TFX) Stock for Now
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Teleflex Incorporated (TFX - Free Report) is gaining from the strength within the Vascular Access and Interventional businesses. The company exited the third quarter of 2021 with better-than-expected earnings and revenues. The recent launch of the UroLift 2 appears promising. The raised earnings per share (EPS) guidance for 2021 also instills optimism. However, escalating operating expenses and COVID-19 headwinds do not bode well.
Over the past year, this Zacks Rank #3 (Hold) stock has declined 9.4% compared with 13% growth of the industry and 30.5% rise of the S&P 500 composite.
The renowned global medical device company has a market capitalization of $15.93 billion. Its last-reported third-quarter 2021 earnings surpassed the Zacks Consensus Estimate by 15.8%.
Over the past five years, the company registered earnings growth of 10.5%, way ahead of the industry’s 3.3% rise and the S&P 500’s 2.8% increase. The company projects 7.8% growth for the next year, compared with the industry’s projected growth rate of 21% and the S&P 500’s estimated 9.8% growth for the next year.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Drivers
Q3 Upsides: Teleflex exited the third quarter of 2021 with better-than-expected results. The year-over-year growth in earnings and revenues looks impressive as well. The bottom line included an estimated favorable impact of approximately 13 cents per share from foreign exchange compared to the prior year. Geographically, the company’s performance was strong in the Americas, EMEA and Asia despite headwinds from the more lethal Delta variant. Strong performance in the Vascular Access, Interventional, Anesthesia, Surgical, Interventional Urology and OEM segments also contributed to top-line growth. Expansion of both margins is another upside. The raised EPS guidance for 2021 buoys optimism.
Urolift Shows Potential: The UroLift system is a minimally-invasive technology for treating lower urinary tract symptoms due to benign prostatic hyperplasia (BPH). Despite reporting softer-than-expected revenues in the third quarter, the company noted that the preference for UroLift continued to be driven by strong clinical results. Teleflex expects to continue its market leadership in day surgery BPH treatments. The company trained 124 urologists with UroLift in the third quarter and is well on track to achieve the annual training target of 450 to 500 urologists in 2021. Further, the launch of two new UroLift System products-- the UroLift Advanced Tissue Control (ATC) System and the UroLift 2 System-- during the quarter raises optimism. The company, in its earnings call for the reported quarter, announced that it is currently on track with the full rollout of UroLift 2 in the United States.
Vascular Business Grows: We are upbeat about Teleflex’s Vascular Access business that registered 9.7% revenue growth year over year and 8.5% at CER during the third quarter of 2021. This segment majorly benefitted from the treatment of COVID-19 patients as the coronavirus infection rate surged dramatically in the reported quarter. The Peripherally Inserted Central Catheters (PICC) portfolio and Intraosseous also contributed to the Vascular Access segment's robust performance in the quarter. Meanwhile, the Interventional business registered net revenues growth of 11.9% year over year and 10.4% at CER. The company continued to invest in the interventional portfolio, including complex catheters and its large-bore closure device, MANTA.
Downsides
Escalating Operating Expenses: In the third quarter of 2021, Teleflex’ research and development expenses rose 8.9% year over year, whereas selling, general and administrative expenses increased 19.5% year over year. These mounting operating expenses are exerting significant pressure on the company’s bottom line.
Prominent Coronavirus Impact: The coronavirus pandemic is wreaking havoc on the economy as a whole, with Teleflex facing the impact since the second half of March 2020. In its earnings call for the third quarter of 2021, the company noted that its operating margin growth during the quarter was somewhat offset by greater-than-anticipated COVID-19 headwinds. The year-over-year growth in the Americas region was also partially offset by the halt in elective surgical procedures owing to the uncertainty around pandemic. Within Asia, Japan’s strong growth in the quarter was partially offset by the impact of COVID-19 in Southeast Asia.
Foreign Exchange Translation Impacts Sales: Foreign exchange is a major headwind for Teleflex as a considerable percentage of its revenues come from outside the United States. The strengthening of the Euro and some other developed market currencies has been constantly hampering the company’s performance in the international markets.
Estimate Trend
Teleflex has been witnessing a positive estimate revision trend for 2021. Over the past 30 days, the Zacks Consensus Estimate for its earnings has moved 2.3% up to $13.26.
The Zacks Consensus Estimate for fourth-quarter 2021 revenues is pegged at $750.89 million, suggesting a 5.6% surge from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space are Chemed Corporation (CHE - Free Report) , National Vision Holdings, Inc. (EYE - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) , each carrying a Zacks Rank #2 (Buy).
Chemed has a long-term earnings growth rate of 7.7%. The company surpassed earnings estimates in three of the trailing four quarters and missed in one, delivering a surprise of 5.6%, on average.
National Vision has a long-term earnings growth rate of 23%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 113.1%.
National Vision has outperformed the industry it belongs to in the past year. EYE has gained 18.1% versus the industry’s 0.1% decline.
West Pharmaceutical has a long-term earnings growth rate of 27.6%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 29.4%.
West Pharmaceutical has outperformed the industry it belongs to in the past year. WST has gained 43.6% versus the industry’s 16.5% growth.
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Here's Why You Should Hold on to Teleflex (TFX) Stock for Now
Teleflex Incorporated (TFX - Free Report) is gaining from the strength within the Vascular Access and Interventional businesses. The company exited the third quarter of 2021 with better-than-expected earnings and revenues. The recent launch of the UroLift 2 appears promising. The raised earnings per share (EPS) guidance for 2021 also instills optimism. However, escalating operating expenses and COVID-19 headwinds do not bode well.
Over the past year, this Zacks Rank #3 (Hold) stock has declined 9.4% compared with 13% growth of the industry and 30.5% rise of the S&P 500 composite.
The renowned global medical device company has a market capitalization of $15.93 billion. Its last-reported third-quarter 2021 earnings surpassed the Zacks Consensus Estimate by 15.8%.
Over the past five years, the company registered earnings growth of 10.5%, way ahead of the industry’s 3.3% rise and the S&P 500’s 2.8% increase. The company projects 7.8% growth for the next year, compared with the industry’s projected growth rate of 21% and the S&P 500’s estimated 9.8% growth for the next year.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Drivers
Q3 Upsides: Teleflex exited the third quarter of 2021 with better-than-expected results. The year-over-year growth in earnings and revenues looks impressive as well. The bottom line included an estimated favorable impact of approximately 13 cents per share from foreign exchange compared to the prior year. Geographically, the company’s performance was strong in the Americas, EMEA and Asia despite headwinds from the more lethal Delta variant. Strong performance in the Vascular Access, Interventional, Anesthesia, Surgical, Interventional Urology and OEM segments also contributed to top-line growth. Expansion of both margins is another upside. The raised EPS guidance for 2021 buoys optimism.
Urolift Shows Potential: The UroLift system is a minimally-invasive technology for treating lower urinary tract symptoms due to benign prostatic hyperplasia (BPH). Despite reporting softer-than-expected revenues in the third quarter, the company noted that the preference for UroLift continued to be driven by strong clinical results. Teleflex expects to continue its market leadership in day surgery BPH treatments. The company trained 124 urologists with UroLift in the third quarter and is well on track to achieve the annual training target of 450 to 500 urologists in 2021. Further, the launch of two new UroLift System products-- the UroLift Advanced Tissue Control (ATC) System and the UroLift 2 System-- during the quarter raises optimism. The company, in its earnings call for the reported quarter, announced that it is currently on track with the full rollout of UroLift 2 in the United States.
Vascular Business Grows: We are upbeat about Teleflex’s Vascular Access business that registered 9.7% revenue growth year over year and 8.5% at CER during the third quarter of 2021. This segment majorly benefitted from the treatment of COVID-19 patients as the coronavirus infection rate surged dramatically in the reported quarter. The Peripherally Inserted Central Catheters (PICC) portfolio and Intraosseous also contributed to the Vascular Access segment's robust performance in the quarter. Meanwhile, the Interventional business registered net revenues growth of 11.9% year over year and 10.4% at CER. The company continued to invest in the interventional portfolio, including complex catheters and its large-bore closure device, MANTA.
Downsides
Escalating Operating Expenses: In the third quarter of 2021, Teleflex’ research and development expenses rose 8.9% year over year, whereas selling, general and administrative expenses increased 19.5% year over year. These mounting operating expenses are exerting significant pressure on the company’s bottom line.
Prominent Coronavirus Impact: The coronavirus pandemic is wreaking havoc on the economy as a whole, with Teleflex facing the impact since the second half of March 2020. In its earnings call for the third quarter of 2021, the company noted that its operating margin growth during the quarter was somewhat offset by greater-than-anticipated COVID-19 headwinds. The year-over-year growth in the Americas region was also partially offset by the halt in elective surgical procedures owing to the uncertainty around pandemic. Within Asia, Japan’s strong growth in the quarter was partially offset by the impact of COVID-19 in Southeast Asia.
Foreign Exchange Translation Impacts Sales: Foreign exchange is a major headwind for Teleflex as a considerable percentage of its revenues come from outside the United States. The strengthening of the Euro and some other developed market currencies has been constantly hampering the company’s performance in the international markets.
Estimate Trend
Teleflex has been witnessing a positive estimate revision trend for 2021. Over the past 30 days, the Zacks Consensus Estimate for its earnings has moved 2.3% up to $13.26.
The Zacks Consensus Estimate for fourth-quarter 2021 revenues is pegged at $750.89 million, suggesting a 5.6% surge from the year-ago reported number.
Key Picks
A few better-ranked stocks in the broader medical space are Chemed Corporation (CHE - Free Report) , National Vision Holdings, Inc. (EYE - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) , each carrying a Zacks Rank #2 (Buy).
Chemed has a long-term earnings growth rate of 7.7%. The company surpassed earnings estimates in three of the trailing four quarters and missed in one, delivering a surprise of 5.6%, on average.
Chemed has outperformed its industry over the past year. CHE has gained 3.7% against a 35.6% industry decline. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
National Vision has a long-term earnings growth rate of 23%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 113.1%.
National Vision has outperformed the industry it belongs to in the past year. EYE has gained 18.1% versus the industry’s 0.1% decline.
West Pharmaceutical has a long-term earnings growth rate of 27.6%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 29.4%.
West Pharmaceutical has outperformed the industry it belongs to in the past year. WST has gained 43.6% versus the industry’s 16.5% growth.