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Teleflex (TFX) Hurt by Urolift Cancellations, Cost Woes

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Teleflex Incorporated (TFX - Free Report) has been witnessing a gradual rebound in revenues, driven by stable performance across its operating segments and geographies. However, escalating operating expenses are putting pressure on the bottom line. The stock currently carries a Zacks Rank #4 (Sell).

Over the past year, Teleflex’s stock has underperformed its industry. The stock has declined 17.3% compared with the industry's 7.4% fall.

During the fourth quarter of 2021, Teleflex witnessed a year-over-year decline in the Other product segment (consisting of the company’s respiratory products that were not included in the divestiture to Medline, manufacturing service agreement revenues and Urology Care products).

The COVID-19 headwinds continue to hamper UroLift procedures, further raising apprehension. Teleflex’s year-over-year increase in revenues in the fourth quarter of 2021 was offset by the impact of COVID-19 and the divestiture of the respiratory assets to Medline.

Teleflex Incorporated Price

On its earnings call for the fourth quarter, the company noted that the year-over-year growth in the Americas region was partially offset by the impact of COVID-19. The EMEA region also continued to face COVID-19 headwinds. For full-year 2021, the Interventional Urology business was disrupted by the COVID-19 pandemic.

Given the deferrable nature of benign prostatic hyperplasia (BPH) treatments, patients’ willingness fluctuates depending on the intensity of the pandemic. The resurgence in COVID-19 cases in the fourth quarter resulted in an increase in UroLift procedure cancellations.

Escalating operating expenses are building pressure on the bottom line. Teleflex’s research and development expenses rose 5.9% in the fourth quarter of 2021.

Apart from this, over the past few quarters, Teleflex has implemented a number of restructuring, realignment and cost reduction initiatives, including facility consolidations, organizational realignments and reductions in the workforce. While the company has historically realized some efficiencies from these initiatives, it may fail to realize the benefits of these or future initiatives to the expected extent. This may also put pressure on the bottom line.

The company also continued to face supply-chain challenges and freight logistic delays. A tough competitive environment and foreign exchange woes persist.

On a positive note, Teleflex exited the fourth quarter of 2021 with better-than-expected results. The company exhibited robust performances across the Americas, EMEA and Asia regions amid COVID-led headwinds. Solid performances by the PICC portfolio and Intraosseous contributed to growth in the Vascular Access segment. Meanwhile, significant growth momentum in MANTA within the Interventional segment delivered promising results. Further, robust sales of Hemostat products contributed to growth in the Anesthesia and Emergency Medicine business.

The company’s UroLift System is a minimally invasive technology for treating lower urinary tract symptoms due to BPH.

Despite being impacted by COVID-19 headwinds in the fourth quarter, the preference for UroLift over other outpatient BPH treatments continued to be driven by strong clinical results. On its earnings call for the fourth quarter, the company announced that it would fully engage its sales organization to advance the rollout of UroLift 2 (launched in September 2021) with the conversion of the vast majority of the U.S. users anticipated by the end of 2022.

The company is also actively engaged in international market expansion, with several milestones expected for 2022. The company expects to begin the rollout of UroLift in Japan after implementing its reimbursement in April 2022. In addition, the company expects to launch UroLift in France, Italy and Spain during the second half of 2022.

Key Picks

A few better-ranked stocks in the broader medical space are McKesson Corporation (MCK - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) .

McKesson, carrying a Zacks Rank #2, reported third-quarter fiscal 2022 adjusted EPS of $6.15, which beat the Zacks Consensus Estimate of $5.38 by 14.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McKesson has a long-term earnings growth rate of 11.8%. MCK has gained 49.7% compared with the industry’s 4.7% growth in the past year.

AMN Healthcare, carrying a Zacks Rank #1, has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average.

AMN Healthcare has outperformed its industry over the past year. AMN has gained 23.8% versus the 62% industry decline.

Bio-Rad reported fourth-quarter 2021 adjusted EPS of $3.21, which surpassed the Zacks Consensus Estimate by 11.9%. It currently has a Zacks Rank #2.

Bio-Rad has an earnings yield of 2.3%, which compares favorably with the industry’s negative yield. BIO surpassed earnings estimates in the trailing four quarters, the average surprise being 66.9%.