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Teleflex (TFX) Hit by Urolift Volume Decline, Cost Pressure
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Teleflex’s (TFX - Free Report) escalating operating expenses are putting pressure on the bottom line. Tough competition and pricing pressure also weigh on the stock. The stock currently carries a Zacks Rank #4 (Sell).
Over the past year, Teleflex has underperformed the industry. The stock has declined 34.1% in this period, compared with a 23.5% drop in the industry. Teleflex’s second-quarter revenues fell short of estimates. The company exhibited a year-over-year decline across the Americas.
For UroLift, the company saw year-over-year revenue declines in all sites of service during the quarter, including hospital, ASC and physician's office. Escalating operating expenses are building pressure on margins. Teleflex’s lowered revenues and adjusted EPS outlook for 2022, indicating lackluster performance in the coming period, increased investors’ concern.
In the Americas, revenues declined 0.3% year over year. In the quarter, growth within the Surgical business was hugely offset by a decline in Interventional Urology.
Further, in the second quarter, Teleflex’s gross profit was down 2.2% year over year. The gross margin contracted 53 basis points to 55.2%. Overall, the adjusted operating profit was down 3.6% year over year. Adjusted operating margin saw a 47-bp contraction year over year to 19.2%.
Apart from this, over the past couple of years, 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.
On a positive note, Teleflex exited the second quarter of 2022 with better-than-expected earnings. The international business witnessed constant currency growth over the second quarter of 2021. The company reported solid execution across the vast majority of Teleflex, with nearly 90% of the collective business driving constant-currency revenues ahead of plan. Volumes have continued to recover in the United States, EMEA and Latin America as COVID hospital admittance declined from the peak levels in the earlier months of 2022.
Excluding UroLift, constant-currency growth in the quarter was 4% year over year as the remainder of the business collectively outperformed the company’s forecast for the quarter. Moreover, when adjusting for the impact of UroLift and the Respiratory divestiture, the rest of the business grew 5.2% at CER, reflecting the benefits of a diversified portfolio that targets critically ill patients.
With respect to Teleflex’s market development objectives for UroLift, the company continued to gain positive feedback from surgeons regarding UroLift 2 as well as the UroLift Advanced Tissue Control for use in the obstructive median lobe. Teleflex believes that the launch of UroLift 2 and the Advanced Tissue Control will enable the company to further engage with surgeons and drive utilization deeper into its labeled indication.
During the second quarter, the company reported procedure growth in accounts that have converted over to UroLift 2. Based on Teleflex’s progress in the second quarter, the company expects to convert the vast majority of its U.S. customers to UroLift 2 by the end of 2022. In turn, the company expects a 400-basis point margin expansion for Interventional Urology associated with the UroLift 2 conversion when the U.S. base is fully switched over.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Patterson Companies, Inc. (PDCO - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has lost 0.4% compared with the industry’s 27.6% fall.
Molina Healthcare has a long-term earnings growth rate of 16.4%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 3.2%, on average. It currently carries a Zacks Rank #2 (Buy).
Molina Healthcare has outperformed its industry in the past year. MOH has gained 30.7% compared with the industry’s 30.6% growth.
Patterson Companies has an estimated long-term growth rate of 7.9%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently has a Zacks Rank #2.
Patterson Companies has outperformed its industry in the past year. PDCO has gained 1.6% against the industry’s 4.1% fall in the past year.
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Teleflex (TFX) Hit by Urolift Volume Decline, Cost Pressure
Teleflex’s (TFX - Free Report) escalating operating expenses are putting pressure on the bottom line. Tough competition and pricing pressure also weigh on the stock. The stock currently carries a Zacks Rank #4 (Sell).
Over the past year, Teleflex has underperformed the industry. The stock has declined 34.1% in this period, compared with a 23.5% drop in the industry. Teleflex’s second-quarter revenues fell short of estimates. The company exhibited a year-over-year decline across the Americas.
For UroLift, the company saw year-over-year revenue declines in all sites of service during the quarter, including hospital, ASC and physician's office. Escalating operating expenses are building pressure on margins. Teleflex’s lowered revenues and adjusted EPS outlook for 2022, indicating lackluster performance in the coming period, increased investors’ concern.
In the Americas, revenues declined 0.3% year over year. In the quarter, growth within the Surgical business was hugely offset by a decline in Interventional Urology.
Teleflex Incorporated Price
Teleflex Incorporated price | Teleflex Incorporated Quote
Further, in the second quarter, Teleflex’s gross profit was down 2.2% year over year. The gross margin contracted 53 basis points to 55.2%. Overall, the adjusted operating profit was down 3.6% year over year. Adjusted operating margin saw a 47-bp contraction year over year to 19.2%.
Apart from this, over the past couple of years, 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.
On a positive note, Teleflex exited the second quarter of 2022 with better-than-expected earnings. The international business witnessed constant currency growth over the second quarter of 2021. The company reported solid execution across the vast majority of Teleflex, with nearly 90% of the collective business driving constant-currency revenues ahead of plan. Volumes have continued to recover in the United States, EMEA and Latin America as COVID hospital admittance declined from the peak levels in the earlier months of 2022.
Excluding UroLift, constant-currency growth in the quarter was 4% year over year as the remainder of the business collectively outperformed the company’s forecast for the quarter. Moreover, when adjusting for the impact of UroLift and the Respiratory divestiture, the rest of the business grew 5.2% at CER, reflecting the benefits of a diversified portfolio that targets critically ill patients.
With respect to Teleflex’s market development objectives for UroLift, the company continued to gain positive feedback from surgeons regarding UroLift 2 as well as the UroLift Advanced Tissue Control for use in the obstructive median lobe. Teleflex believes that the launch of UroLift 2 and the Advanced Tissue Control will enable the company to further engage with surgeons and drive utilization deeper into its labeled indication.
During the second quarter, the company reported procedure growth in accounts that have converted over to UroLift 2. Based on Teleflex’s progress in the second quarter, the company expects to convert the vast majority of its U.S. customers to UroLift 2 by the end of 2022. In turn, the company expects a 400-basis point margin expansion for Interventional Urology associated with the UroLift 2 conversion when the U.S. base is fully switched over.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Patterson Companies, Inc. (PDCO - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has lost 0.4% compared with the industry’s 27.6% fall.
Molina Healthcare has a long-term earnings growth rate of 16.4%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 3.2%, on average. It currently carries a Zacks Rank #2 (Buy).
Molina Healthcare has outperformed its industry in the past year. MOH has gained 30.7% compared with the industry’s 30.6% growth.
Patterson Companies has an estimated long-term growth rate of 7.9%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently has a Zacks Rank #2.
Patterson Companies has outperformed its industry in the past year. PDCO has gained 1.6% against the industry’s 4.1% fall in the past year.