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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 a strong preference for the UroLift system. The company exited the third quarter of 2022 with better-than-expected earnings. However, escalating costs and foreign exchange headwinds do not bode well.
In the past year, this Zacks Rank #3 (Hold) stock has declined 20.1% compared with a 19.9% fall of the industry and a 18.9% drop of the S&P 500 composite.
The renowned global medical device company has a market capitalization of $11.87 billion. Its first-quarter 2022 earnings surpassed the Zacks Consensus Estimate by 5.5%.
The company anticipated earnings growth rate of 6.6% for the next five years compared with the industry’s growth projection of 16.2%.
Let’s delve deeper.
Key Drivers
Q3 Upside: Teleflex exited the third quarter of 2022 with better-than-expected earnings. When excluding UroLift and adjusting for the Respiratory divestiture, the remaining 88% of the company’s business grew at an underlying rate of 4.3% in the third quarter. The upside continued to reflect the benefit of Teleflex's diversified portfolio, which has been purposely built to target the care of critically ill patients. Teleflex saw an improvement in revenues as the third quarter progressed, with September strengthening over July and August.
Urolift Prospects Strong: UroLift System is a minimally invasive technology for treating lower urinary tract symptoms due to benign prostatic hyperplasia (BPH).
Image Source: Zacks Investment Research
Despite being impacted by the ongoing macro and COVID-19 headwinds, the preference for UroLift over other outpatient BPH treatments continued to be driven by strong clinical results. Several studies on Urolift have demonstrated rapid symptom relief and recovery, no new sustained sexual dysfunction and durable results.
Business in Asia Holds Long-Term Potential: Observing strong demand for the company’s wide product line in emerging economies, Teleflex is focusing on expansion in densely populated geographies like Asia. The company has a solid market base for its Interventional Access and Anesthesia products in this region. During the third quarter of 2022, revenues in Asia rose 20.5% year over year on a CER basis. China had a strong performance, with growth exceeding 19%.
Downsides
Escalating Expenses Put Pressure on Bottom Line: In the third quarter, Teleflex’ gross profit was down 3.6% year over year. The gross margin contracted 93 basis points (bps) to 54.5%. Overall, the adjusted operating profit was down 16.1% year over year. Adjusted operating margin saw a 310-bp contraction year over year to 18.4%.
Foreign Exchange Translation Impacts Sales: Foreign exchange is a major headwind for Teleflex due to a considerable percentage of its revenues coming 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
In the past 30 days, the Zacks Consensus Estimate for Teleflex’s 2022 earnings has been unchanged at $12.98.
The Zacks Consensus Estimate for 2022 revenues is pegged at $2.79 billion, suggesting a 0.6% fall from the 2021 reported number.
Other Key Picks
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Boston Scientific Corporation (BSX - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 10.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has lost 10.6% compared with the industry’s 30.3% decline in the past year.
Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.3%. BSX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average beat being 1.9%.
Boston Scientific has gained 6.8% against the industry’s 42.6% decline over the past year.
Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 13.7% against the industry’s 8.7% decline over the past year.
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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 a strong preference for the UroLift system. The company exited the third quarter of 2022 with better-than-expected earnings. However, escalating costs and foreign exchange headwinds do not bode well.
In the past year, this Zacks Rank #3 (Hold) stock has declined 20.1% compared with a 19.9% fall of the industry and a 18.9% drop of the S&P 500 composite.
The renowned global medical device company has a market capitalization of $11.87 billion. Its first-quarter 2022 earnings surpassed the Zacks Consensus Estimate by 5.5%.
The company anticipated earnings growth rate of 6.6% for the next five years compared with the industry’s growth projection of 16.2%.
Let’s delve deeper.
Key Drivers
Q3 Upside: Teleflex exited the third quarter of 2022 with better-than-expected earnings. When excluding UroLift and adjusting for the Respiratory divestiture, the remaining 88% of the company’s business grew at an underlying rate of 4.3% in the third quarter. The upside continued to reflect the benefit of Teleflex's diversified portfolio, which has been purposely built to target the care of critically ill patients. Teleflex saw an improvement in revenues as the third quarter progressed, with September strengthening over July and August.
Urolift Prospects Strong: UroLift System is a minimally invasive technology for treating lower urinary tract symptoms due to benign prostatic hyperplasia (BPH).
Despite being impacted by the ongoing macro and COVID-19 headwinds, the preference for UroLift over other outpatient BPH treatments continued to be driven by strong clinical results. Several studies on Urolift have demonstrated rapid symptom relief and recovery, no new sustained sexual dysfunction and durable results.
Business in Asia Holds Long-Term Potential: Observing strong demand for the company’s wide product line in emerging economies, Teleflex is focusing on expansion in densely populated geographies like Asia. The company has a solid market base for its Interventional Access and Anesthesia products in this region. During the third quarter of 2022, revenues in Asia rose 20.5% year over year on a CER basis. China had a strong performance, with growth exceeding 19%.
Downsides
Escalating Expenses Put Pressure on Bottom Line: In the third quarter, Teleflex’ gross profit was down 3.6% year over year. The gross margin contracted 93 basis points (bps) to 54.5%. Overall, the adjusted operating profit was down 16.1% year over year. Adjusted operating margin saw a 310-bp contraction year over year to 18.4%.
Foreign Exchange Translation Impacts Sales: Foreign exchange is a major headwind for Teleflex due to a considerable percentage of its revenues coming 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
In the past 30 days, the Zacks Consensus Estimate for Teleflex’s 2022 earnings has been unchanged at $12.98.
The Zacks Consensus Estimate for 2022 revenues is pegged at $2.79 billion, suggesting a 0.6% fall from the 2021 reported number.
Other Key Picks
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Boston Scientific Corporation (BSX - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 10.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has lost 10.6% compared with the industry’s 30.3% decline in the past year.
Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.3%. BSX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average beat being 1.9%.
Boston Scientific has gained 6.8% against the industry’s 42.6% decline over the past year.
Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 13.7% against the industry’s 8.7% decline over the past year.