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Integer Holdings Corporation (ITGR - Free Report) delivered an adjusted earnings per share (EPS) of 87 cents in the first quarter of 2023, which improved 11.5% year over year. The figure topped the Zacks Consensus Estimate by 6.1%.
The adjustments include expenses related to the amortization of intangible assets, and restructuring and restructuring-related charges, among others.
Our projection of adjusted EPS was 85 cents.
GAAP EPS for the quarter was 39 cents, reflecting an improvement of 14.7% year over year.
Revenues in Detail
Integer Holdings registered revenues of $378.8 million in the first quarter, up 21.8% year over year. The figure surpassed the Zacks Consensus Estimate by 7.9%.
Organically, revenues increased 20.5%.
The first-quarter revenue compares to our estimate of $358 million.
Robust segmental performances drove the company’s top line in the reported period.
Segmental Analysis
Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.
Medical Sales reported revenues of $364.3 million, up 20.6% year over year on a reported and 19.3% on an organic basis.
This figure compares to our Medical Sales first-quarter projection of $346 million.
Medical Sales has three product lines — Advanced Surgical, Orthopedics & Portable Medical (AS&O); Cardio & Vascular; and Cardiac Rhythm Management & Neuromodulation.
Integer Holdings’ AS&O revenues amounted to $27.9 million, up 41.9% year over year on a reported and 42% on an organic basis. Per management, this resulted from increased price and demand as a result of the execution of the multi-year Portable Medical exit announced in 2022. However, this was partially offset by a single-digit decline in Advanced Surgical and Orthopedics.
Revenues at the Cardio & Vascular business totaled $191.2 million, up 20.2% from the prior-year quarter on a reported basis and up 17.7% organically. The solid year-over-year performance was driven by strong demand across all markets and key products, such as guidewires, new product ramps in electrophysiology, and strong performance from the Oscor and Aran acquisitions.
Revenues at the Cardiac Rhythm Management & Neuromodulation business were $145.1 million, up 17.7% year over year both on a reported and organic basis. The business was driven by strong demand, including double-digit growth from emerging customers with premarket approval products.
This compares to our first-quarter projections of $25.3 million, $182 million and $138.6 million, respectively, for each of the product lines.
Revenues in the Non-Medical segment totaled $14.5 million, up 63.4% year over year. This was driven by strong sales at the Electrochem product line, part of the Non-Medical segment, across all market segments and continued supplier delivery recovery.
This figure compares to our segmental projection of $12 million for the first quarter.
Integer Holdings Corporation Price, Consensus and EPS Surprise
Integer Holdings generated a gross profit of $96.7 million in the first quarter, up 18.7% year over year. However, the gross margin in the reported quarter contracted 68 basis points (bps) to 25.5%.
We had projected a 26.2% of gross margin for the first quarter.
Selling, general and administrative expenses were $41.9 million, up 5.9% year over year. Research, development and engineering costs were $19.1 million in the quarter, up 18.7% year over year. Adjusted operating expenses of $60.9 million increased 9.6% year over year.
Adjusted operating profit totaled $35.7 million, reflecting a 38.2% uptick from the prior-year quarter. Adjusted operating margin in the first quarter expanded 112 bps to 9.4%.
Financial Position
Integer Holdings exited the first quarter of 2023 with cash and cash equivalents of $40.6 million compared with $24.3 million at the end of 2022. Total debt (including the current portion) at the end of first-quarter 2023 was $1 billion compared with $925.3 million at the end of 2022.
Net cash flow from operating activities at the end of first-quarter 2023 was $6.2 million compared with $18.2 million a year ago.
2023 Guidance
Integer Holdings has reiterated its financial outlook for 2023.
For 2023, the company continues to expect revenues in the range of $1,470 million-$1,500 million (suggesting an improvement of 7-9% from the 2022 reported figure). The Zacks Consensus Estimate for the same is pegged at $1.49 billion.
The company continues to expect full-year adjusted EPS to be in the band of $4.00-$4.30 (suggesting a rise of 3-11% from the 2022 reported figure). The Zacks Consensus Estimate for the same is pegged at $4.13.
Our Take
Integer Holdings exited the first quarter of 2023 with better-than-expected results. The strong year-over-year top-line and bottom-line performances are impressive. Robust performances by both segments and strength in all three product lines of the Medical Sales segment are encouraging. Continued benefits from the Oscor and Aran acquisitions look promising. The expansion of the adjusted operating margin bodes well for the stock.
Integer Holdings’ strong product development pipeline in high-growth markets, emerging customer product launches, successful tuck-in acquisitions and underlying strength of existing programs also look promising for the stock.
However, the rising operating costs putting pressure on the gross margin, leading to its contraction, is discouraging. Integer Holdings’ business was widely hampered by challenging labor and supply chain environment, which raised our apprehension.
Zacks Rank and Stocks to Consider
Integer Holdings currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation (EW - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Johnson & Johnson (JNJ - Free Report) .
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported first-quarter 2023 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted EPS of $2.68, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.
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Integer Holdings (ITGR) Q1 Earnings, Revenues Beat Estimates
Integer Holdings Corporation (ITGR - Free Report) delivered an adjusted earnings per share (EPS) of 87 cents in the first quarter of 2023, which improved 11.5% year over year. The figure topped the Zacks Consensus Estimate by 6.1%.
The adjustments include expenses related to the amortization of intangible assets, and restructuring and restructuring-related charges, among others.
Our projection of adjusted EPS was 85 cents.
GAAP EPS for the quarter was 39 cents, reflecting an improvement of 14.7% year over year.
Revenues in Detail
Integer Holdings registered revenues of $378.8 million in the first quarter, up 21.8% year over year. The figure surpassed the Zacks Consensus Estimate by 7.9%.
Organically, revenues increased 20.5%.
The first-quarter revenue compares to our estimate of $358 million.
Robust segmental performances drove the company’s top line in the reported period.
Segmental Analysis
Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.
Medical Sales reported revenues of $364.3 million, up 20.6% year over year on a reported and 19.3% on an organic basis.
This figure compares to our Medical Sales first-quarter projection of $346 million.
Medical Sales has three product lines — Advanced Surgical, Orthopedics & Portable Medical (AS&O); Cardio & Vascular; and Cardiac Rhythm Management & Neuromodulation.
Integer Holdings’ AS&O revenues amounted to $27.9 million, up 41.9% year over year on a reported and 42% on an organic basis. Per management, this resulted from increased price and demand as a result of the execution of the multi-year Portable Medical exit announced in 2022. However, this was partially offset by a single-digit decline in Advanced Surgical and Orthopedics.
Revenues at the Cardio & Vascular business totaled $191.2 million, up 20.2% from the prior-year quarter on a reported basis and up 17.7% organically. The solid year-over-year performance was driven by strong demand across all markets and key products, such as guidewires, new product ramps in electrophysiology, and strong performance from the Oscor and Aran acquisitions.
Revenues at the Cardiac Rhythm Management & Neuromodulation business were $145.1 million, up 17.7% year over year both on a reported and organic basis. The business was driven by strong demand, including double-digit growth from emerging customers with premarket approval products.
This compares to our first-quarter projections of $25.3 million, $182 million and $138.6 million, respectively, for each of the product lines.
Revenues in the Non-Medical segment totaled $14.5 million, up 63.4% year over year. This was driven by strong sales at the Electrochem product line, part of the Non-Medical segment, across all market segments and continued supplier delivery recovery.
This figure compares to our segmental projection of $12 million for the first quarter.
Integer Holdings Corporation Price, Consensus and EPS Surprise
Integer Holdings Corporation price-consensus-eps-surprise-chart | Integer Holdings Corporation Quote
Margin Analysis
Integer Holdings generated a gross profit of $96.7 million in the first quarter, up 18.7% year over year. However, the gross margin in the reported quarter contracted 68 basis points (bps) to 25.5%.
We had projected a 26.2% of gross margin for the first quarter.
Selling, general and administrative expenses were $41.9 million, up 5.9% year over year. Research, development and engineering costs were $19.1 million in the quarter, up 18.7% year over year. Adjusted operating expenses of $60.9 million increased 9.6% year over year.
Adjusted operating profit totaled $35.7 million, reflecting a 38.2% uptick from the prior-year quarter. Adjusted operating margin in the first quarter expanded 112 bps to 9.4%.
Financial Position
Integer Holdings exited the first quarter of 2023 with cash and cash equivalents of $40.6 million compared with $24.3 million at the end of 2022. Total debt (including the current portion) at the end of first-quarter 2023 was $1 billion compared with $925.3 million at the end of 2022.
Net cash flow from operating activities at the end of first-quarter 2023 was $6.2 million compared with $18.2 million a year ago.
2023 Guidance
Integer Holdings has reiterated its financial outlook for 2023.
For 2023, the company continues to expect revenues in the range of $1,470 million-$1,500 million (suggesting an improvement of 7-9% from the 2022 reported figure). The Zacks Consensus Estimate for the same is pegged at $1.49 billion.
The company continues to expect full-year adjusted EPS to be in the band of $4.00-$4.30 (suggesting a rise of 3-11% from the 2022 reported figure). The Zacks Consensus Estimate for the same is pegged at $4.13.
Our Take
Integer Holdings exited the first quarter of 2023 with better-than-expected results. The strong year-over-year top-line and bottom-line performances are impressive. Robust performances by both segments and strength in all three product lines of the Medical Sales segment are encouraging. Continued benefits from the Oscor and Aran acquisitions look promising. The expansion of the adjusted operating margin bodes well for the stock.
Integer Holdings’ strong product development pipeline in high-growth markets, emerging customer product launches, successful tuck-in acquisitions and underlying strength of existing programs also look promising for the stock.
However, the rising operating costs putting pressure on the gross margin, leading to its contraction, is discouraging. Integer Holdings’ business was widely hampered by challenging labor and supply chain environment, which raised our apprehension.
Zacks Rank and Stocks to Consider
Integer Holdings currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation (EW - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Johnson & Johnson (JNJ - Free Report) .
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported first-quarter 2023 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted EPS of $2.68, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.