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Teleflex (TFX) Urolift Market Expansion Strong, Cost Woe Stays

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Teleflex (TFX - Free Report) continues to report an improvement in revenues banking on balanced growth across all segments and geographies. Yet, escalating operating expenses are putting immense pressure on the bottom line. The stock carries a Zacks Rank #3 (Hold).

Teleflex’s Interventional Surgical and OEM product categories generated double-digit constant-currency revenue growth in the fourth quarter on a year-over-year basis. Adjusting for the divestiture of Respiratory assets and one less shipping day, constant-currency revenue growth was 4.3% for 2022 as healthcare utilization improved through the year and the demand for Teleflex products accelerated.

The company’s high-growth revenue portfolio maintained momentum across most growth drivers. TFX saw strength across the region, with all geographies posting solid growth in the fourth quarter. China grew 7% despite pandemic-associated disruptions toward the end of the quarter. The Asia region also generated strong results and continues to be an important growth driver for Teleflex.

With respect to Teleflex’s market development objectives for UroLift, the company continued to train new physicians in the fourth quarter and has reached its target for 2022. With access to surgeons improving, to support new physician onboarding for UroLift, Teleflex hosted live BPH summit training sessions in the United States, Australia and Japan in 2022.

The company continues to receive positive feedback from surgeons regarding UroLift 2, while UroLift advanced tissue control for use in obstructive median lobes saw increased momentum in the fourth quarter. The company will continue to invest in DTC initiatives for UroLift, including a refreshed television and digital campaign, which was launched in February 2023.

In terms of an international expansion strategy for UroLift, Teleflex made considerable progress in the geographic expansion of UroLift, with entry into several new markets in 2022, including Japan and China. In Japan, TFX had strong launch execution, with UroLift gaining sequential traction through 2022. In China, the company initiated UroLift cases in the fourth quarter as anticipated. The company will spend 2023 training surgeons, building its presence in key cities and continuing to engage with the Chinese Urological Society to build acceptance.

Meanwhile, Teleflex’s fourth-quarter revenues fell short of estimates. The company exhibited a year-over-year decline in both adjusted EPS and revenues.

In 2022, patient visits to urologists were down year over year, and staffing shortages remained a bottleneck for procedures, especially in the office setting. Foreign exchange remained a major headwind as the dollar strengthened against a broad basket of currencies in the second half of 2022.

Further, escalating expenses put pressure on the operating margin. In the fourth quarter, Teleflex’s adjusted operating profit was down 6.7% year over year. The adjusted operating margin saw a 127-bp contraction year over year to 19.3%.

Over the past, Teleflex has implemented many restructuring, realignment and cost-reduction initiatives, including facility consolidations, organizational realignments and reductions in the workforce. While TFX 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.

Over the past year, Teleflex has underperformed the industry. The stock has declined 29.3% in this period compared with an 18% drop of the industry.

Key Picks

Some better-ranked stocks in the overall healthcare sector are Haemonetics Corporation (HAE - Free Report) , Catalyst Pharmaceuticals (CPRX - Free Report) and Avanos Medical (AVNS - Free Report) . Haemonetics and Catalyst Pharmaceuticals each sport a Zacks Rank #1 (Strong Buy), while Avanos Medical has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics’ stock has risen 25.8% in the past year. Earnings estimates for Haemonetics have remained constant at $2.94 in 2023 and $3.29 in 2024 in the past 30 days.

HAE’s earnings beat estimates in all the last four quarters, delivering an average surprise of 10.98%. In the last reported quarter, it reported an earnings surprise of 7.59%.

Estimates for Catalyst Pharmaceuticals’ 2023 earnings have increased from $1.17 to $1.42 in the past 30 days. Shares of the company have increased 101.7% in the past year.

CPRX’s earnings beat estimates in three quarters while beating the same in one, the average surprise being 3.35%. In the last reported quarter, Catalyst Pharmaceuticals delivered an earnings surprise of 4.76%

Estimates for Avanos Medical’s 2023 earnings have remained constant at $1.68 in the past 30 days. Shares of the company have declined 15.6% in the past year compared with the industry’s fall of 17.3%.

AVNS’ earnings beat estimates in all the trailing four quarters, the average surprise being 11.01%. In the last reported quarter, Avanos Medical delivered an earnings surprise of 25%.

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