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Integer Holdings (ITGR) Q2 Earnings Top Estimates, FY23 View Up
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Integer Holdings Corporation (ITGR - Free Report) delivered adjusted earnings per share (EPS) of $1.14 in the second quarter of 2023, which improved 9.6% year over year. The figure topped the Zacks Consensus Estimate by 15.2%.
The adjustments include expenses related to the amortization of intangible assets, and restructuring and restructuring-related charges, among others.
GAAP EPS for the quarter was 71 cents, reflecting an improvement of 14.5% year over year.
Revenues in Detail
Integer Holdings registered revenues of $400 million in the second quarter, up 14.3% year over year. The figure surpassed the Zacks Consensus Estimate by 8.9%.
Organically, revenues increased 14.2%.
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 $389.1 million, up 14.5% year over year on a reported and 14.4% on an organic basis.
This figure compares to our Medical Sales second-quarter projection of $351.9 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 $27.2 million, up 16.8% year over year both on a reported and 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 and the low-single-digit growth of Advanced Surgical and Orthopedics.
This compares to our second-quarter projection of $26.7 million for AS&O revenues.
Revenues at the Cardio & Vascular business totaled $208.5 million, up 15.4% from the prior-year quarter on a reported basis and up 15.3% organically. The solid year-over-year performance was driven by continued strong demand across all markets, growth in key products such as guidewires, new product ramps in electrophysiology, and supply chain improvements.
This compares to our second-quarter projection of $185 million.
Revenues at the Cardiac Rhythm Management & Neuromodulation business were $153.4 million, up 12.8% 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 and supply chain improvements.
This compares to our second-quarter projection of $140.2 million for the product line.
Revenues in the Non-Medical segment totaled $10.9 million, up 6.7% year over year both on a reported and organic basis. This was driven by strong demand in military and environmental market segments. However, this was partially offset by a decline in the energy market.
This figure compares to our segmental projection of $13.1 million for the second quarter.
Integer Holdings Corporation Price, Consensus and EPS Surprise
Integer Holdings generated a gross profit of $105.8 million in the second quarter, up 13.9% year over year. However, the gross margin in the reported quarter contracted 9 basis points (bps) to 26.4%.
We had projected 27.6% of gross margin for the second quarter.
Selling, general and administrative expenses were $45.8 million, up 9.7% year over year. Research, development and engineering costs were $16.9 million in the quarter, up 13.5% year over year. Adjusted operating expenses of $62.7 million increased 10.7% year over year.
Adjusted operating profit totaled $43.1 million, reflecting an 18.9% uptick from the prior-year quarter. Adjusted operating margin in the second quarter expanded 42 bps to 10.8%.
Financial Position
Integer Holdings exited the second quarter of 2023 with cash and cash equivalents of $38.6 million compared with $40.6 million at the end of the first quarter. Total debt (including the current portion) at the end of second-quarter 2023 was $985.4 million compared with $1 billion at the first-quarter end.
Cumulative net cash flow from operating activities at the end of second-quarter 2023 was $62.3 million compared with $37 million a year ago.
2023 Guidance
Integer Holdings has upped its financial outlook for 2023 on the back of continued strong customer demand across its product lines.
For 2023, the company now expects revenues in the range of $1,530 million-$1,550 million (suggesting an improvement of 11-13% from the 2022 reported figure), up from the earlier projection 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 now expects full-year adjusted EPS to be in the band of $4.23-$4.43 (suggesting a rise of 9-14% from the 2022 reported figure), up from the earlier projection 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 $4.15.
Our Take
Integer Holdings exited the second quarter of 2023 with better-than-expected results. The strong year-over-year top-line and bottom-line performances were impressive. Robust performances by both segments and strength in all three product lines of the Medical Sales segment were encouraging. The expansion of the adjusted operating margin bodes well for the stock.
However, the rising operating costs putting pressure on the gross margin, leading to its contraction, is discouraging. Integer Holdings continuing to navigate a challenging labor and supply chain environment raises our apprehension.
Zacks Rank and Other Key Picks
Integer Holdings currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 15.7%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.
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Integer Holdings (ITGR) Q2 Earnings Top Estimates, FY23 View Up
Integer Holdings Corporation (ITGR - Free Report) delivered adjusted earnings per share (EPS) of $1.14 in the second quarter of 2023, which improved 9.6% year over year. The figure topped the Zacks Consensus Estimate by 15.2%.
The adjustments include expenses related to the amortization of intangible assets, and restructuring and restructuring-related charges, among others.
GAAP EPS for the quarter was 71 cents, reflecting an improvement of 14.5% year over year.
Revenues in Detail
Integer Holdings registered revenues of $400 million in the second quarter, up 14.3% year over year. The figure surpassed the Zacks Consensus Estimate by 8.9%.
Organically, revenues increased 14.2%.
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 $389.1 million, up 14.5% year over year on a reported and 14.4% on an organic basis.
This figure compares to our Medical Sales second-quarter projection of $351.9 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 $27.2 million, up 16.8% year over year both on a reported and 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 and the low-single-digit growth of Advanced Surgical and Orthopedics.
This compares to our second-quarter projection of $26.7 million for AS&O revenues.
Revenues at the Cardio & Vascular business totaled $208.5 million, up 15.4% from the prior-year quarter on a reported basis and up 15.3% organically. The solid year-over-year performance was driven by continued strong demand across all markets, growth in key products such as guidewires, new product ramps in electrophysiology, and supply chain improvements.
This compares to our second-quarter projection of $185 million.
Revenues at the Cardiac Rhythm Management & Neuromodulation business were $153.4 million, up 12.8% 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 and supply chain improvements.
This compares to our second-quarter projection of $140.2 million for the product line.
Revenues in the Non-Medical segment totaled $10.9 million, up 6.7% year over year both on a reported and organic basis. This was driven by strong demand in military and environmental market segments. However, this was partially offset by a decline in the energy market.
This figure compares to our segmental projection of $13.1 million for the second 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 $105.8 million in the second quarter, up 13.9% year over year. However, the gross margin in the reported quarter contracted 9 basis points (bps) to 26.4%.
We had projected 27.6% of gross margin for the second quarter.
Selling, general and administrative expenses were $45.8 million, up 9.7% year over year. Research, development and engineering costs were $16.9 million in the quarter, up 13.5% year over year. Adjusted operating expenses of $62.7 million increased 10.7% year over year.
Adjusted operating profit totaled $43.1 million, reflecting an 18.9% uptick from the prior-year quarter. Adjusted operating margin in the second quarter expanded 42 bps to 10.8%.
Financial Position
Integer Holdings exited the second quarter of 2023 with cash and cash equivalents of $38.6 million compared with $40.6 million at the end of the first quarter. Total debt (including the current portion) at the end of second-quarter 2023 was $985.4 million compared with $1 billion at the first-quarter end.
Cumulative net cash flow from operating activities at the end of second-quarter 2023 was $62.3 million compared with $37 million a year ago.
2023 Guidance
Integer Holdings has upped its financial outlook for 2023 on the back of continued strong customer demand across its product lines.
For 2023, the company now expects revenues in the range of $1,530 million-$1,550 million (suggesting an improvement of 11-13% from the 2022 reported figure), up from the earlier projection 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 now expects full-year adjusted EPS to be in the band of $4.23-$4.43 (suggesting a rise of 9-14% from the 2022 reported figure), up from the earlier projection 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 $4.15.
Our Take
Integer Holdings exited the second quarter of 2023 with better-than-expected results. The strong year-over-year top-line and bottom-line performances were impressive. Robust performances by both segments and strength in all three product lines of the Medical Sales segment were encouraging. The expansion of the adjusted operating margin bodes well for the stock.
However, the rising operating costs putting pressure on the gross margin, leading to its contraction, is discouraging. Integer Holdings continuing to navigate a challenging labor and supply chain environment raises our apprehension.
Zacks Rank and Other Key Picks
Integer Holdings currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 15.7%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.