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Here's Why You Should Retain Integra (IART) Stock For Now

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Integra LifeSciences Holdings Corporation (IART - Free Report) has been gaining from robust performance by the Codman Specialty Surgical (CSS) arm. The company’s continued efforts toward portfolio optimization buoy optimism. A strong solvency position is an added advantage. However, stiff competition and foreign exchange headwinds do not bode well.

Over the past year, the Zacks Rank #3 (Hold) stock has declined 14.4%, against the 7.4% fall of the industry. This compares to a 5% rise of the S&P 500.

The renowned medical device company has a market capitalization of $5.31 billion.

Over the past five years, the company registered earnings growth of 12.6%, ahead of the industry’s 8.6% rise and the S&P 500’s 13.4% increase. The company’s long-term projected growth of 9.4% compares with the industry’s growth projection of 15.8% and the S&P 500’s projected 11% growth.

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Let’s delve deeper.

Factors At Play

Strong Focus on Portfolio Optimization: Integra reshaped its portfolio with a strategic divestiture related to the ACell acquisition. The ACell business stabilized in the fourth quarter, delivering $16.9 million in sales, in line with the company’s guidance. The company’s launch of CereLink raises the bar in ICP monitoring to enhance accuracy, usability and advanced data presentation. Over the next several years, CereLink's growth is expected to be fueled by the United States and Europe, which account for around half of the global market for neuro-critical care monitors.

Integra has also initiated a phased clinical launch of its Aurora surgiscope intended specifically for use in the deep sea to brain lesions. Recently, the company concluded a multicenter study regarding the use of PriMatrix in treating diabetic foot ulcers to expand commercial coverage.

Strong Prospects in CSS Arm: In the fourth quarter, revenues at Integra’s CSS segment grew 6.4% year over year on a reported basis (organically, up 9%). This improvement can be attributed to equal contribution from both neurosurgery and instruments. The recovery in global neurosurgery sales was broad-based, and sales and instruments continued to benefit from pent-up demand.

The company witnessed continued growth contribution from the launch of CereLink in the United States and Europe. The International sales in CSS increased across all major regions compared to the prior year.

Strong Solvency: Integra exited 2021 with cash and cash equivalents of $513 million. At the end of the fourth quarter, the company's net debt was $1.54 billion. Although the fourth quarter’s total debt was much higher than the corresponding cash and cash equivalent level, short-term payable debt of $45 million on its balance sheet is much lower than the short-term cash level. This is good news in terms of the company’s solvency position, particularly during such distressing times.

Downsides

Natural Calamities Might Hamper Business: Many of Integra’s manufacturing, development or research facilities are vulnerable to natural disasters or unwanted events. In particular, the company’s San Diego and Irvine, CA facilities are susceptible to earthquake damage, wildfire damage and power losses from electrical shortages.

Forex Woes: Integra generates significant revenues outside the United States, a portion of which are U.S. dollar-denominated transactions conducted with customers who generate revenue in currencies other than the U.S. dollar. This makes the company susceptible to unfavorable currency fluctuations, which might impact the demand for its products in foreign countries.

Tough Competition: Integra faces substantial competition in the surgical implants and medical instruments market. The company needs to be innovative on the product front in order to keep up with the competition.

Estimate Trend

Over the past 90 days, the Zacks Consensus Estimate for Integra’s earnings has moved south by 3.5% to $3.30.

The Zacks Consensus Estimate for its 2022 revenues is pegged at $1.59 billion, suggesting a 3.04% uptick from the 2021 reported number.

Key Picks

A few better-ranked stocks in the broader medical space are Owens & Minor, Inc. (OMI - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and Abiomed, Inc. (ABMD - Free Report) .

Owens & Minor has a long-term earnings growth rate of 8.8%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 29.5%, on average. It currently flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Owens & Minor has outperformed the industry over the past year. OMI has gained 7.5% against a 19.7% industry decline in the said period.

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN Healthcare’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 20%. It currently carries a Zacks Rank #2.

AMN Healthcare has outperformed the industry over the past year. AMN has gained 36.2% against the industry’s 59.9% fall over the past year.

Abiomed has an estimated long-term growth rate of 20%. Abiomed’s earnings surpassed estimates in the trailing four quarters, the average surprise being 9.2%. It currently carries a Zacks Rank #2.

Abiomed has underperformed the industry over the past year. ABMD has lost 10.1% compared with the industry’s 7.4% fall over the past year.