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Integer Holdings Q3 Earnings Surpass Estimates, Revenues Up Y/Y
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Integer Holdings Corporation (ITGR - Free Report) delivered adjusted earnings per share (EPS) of $1.43 in the third quarter of 2024, which improved 10.9% year over year. The figure topped the Zacks Consensus Estimate by 5.15%.
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 $1.01, reflecting an improvement of 21.7% year over year.
Integer Holdings registered revenues of $431.4 million in the third quarter, up 8.7% year over year. The figure missed the Zacks Consensus Estimate by 2.7%.
Last month, ITGR announced an agreement to divest its Electrochem business, which focuses on non-medical applications for the energy, military and environmental sectors, to Ultralife Corporation for $50 million in cash. Per management, it started the non-medical business, treating it as a discontinued operation in the third quarter. The deal is expected to close by the end of October.
Medical Sales reported total revenues of $431.4 million, up 8.7% year over year on a reported and 4.3% on an organic basis. This figure compares to our Medical Sales third-quarter projections of $438.8 million.
Medical Sales has three product lines — Advanced Surgical, Orthopedics & Portable Medical (AS&O); Cardio and Vascular (C&V); and Cardiac Rhythm Management & Neuromodulation (CRM&N).
Integer Holdings’ AS&O revenues amounted to $25.3 million, up 11.6% year over year on a reported and down 1% on an organic basis. This is due to fulfillment timing of last-time-buy orders related to the planned multi-year Portable Medical exit announced in 2022. This compares to our third-quarter projections of $22.6 million for AS&O revenues.
Revenues of the C&V business totaled $241 million, up 12.6% from the prior-year quarter on a reported basis and up 6.2% organically. The solid year-over-year performance was driven by new product ramps in electrophysiology and structural heart, and the InNeuroCo and Pulse acquisitions. This compares to our third-quarter projections of $239.2 million.
Revenues of the CRM&N business were $165.1 million, up 3.1% year over year on a reported and 2.2% on an organic basis. The solid year-over-year performance was driven by strong growth in emerging neuromodulation customers with PMA (pre-market approval) products. This compares to our third-quarter projections of $177 million for the product line.
Margin Analysis
Integer Holdings generated a gross profit of $116.6 million in the third quarter, up 11% year over year. The gross margin in the reported quarter expanded 56 basis points (bps) to 27%. We had projected 27% of gross margin for the third quarter.
Selling, general and administrative expenses were $44.8 million, up 8.1% year over year. Research, development and engineering costs were $11.9 million in the quarter, down 15.2% year over year. Adjusted operating expenses of $56.7 million increased 2.2% year over year.
Adjusted operating profit totaled $75.6 million, reflecting a 17.1% uptick from the prior-year quarter. Adjusted operating margin in the third quarter expanded 125 bps to 17.5%.
Financial Position
Integer Holdings exited the third quarter of 2024 with cash and cash equivalents of $35.6 million compared with $34.1 million at the second-quarter end. Total debt (including the current portion) at the end of third-quarter 2024 was $1.08 billion compared with $1.12 billion at the second-quarter end.
Cumulative net cash flow from operating activities at the end of third-quarter 2024 was $141.9 million compared with $124.6 million a year ago.
2024 Guidance
Integer Holdings has revised its financial outlook for 2024 to exclude its Electrochem business.
For 2024, the company now expects revenues in the range of $1,707 million-$1,727 million (implying an improvement of 10-11% from the 2023 reported figure). The Zacks Consensus Estimate is pegged at $1.75 billion.
The company now expects full-year adjusted EPS in the band of $5.24-$5.43 (indicating a rise of 14-18% from the 2023 reported figure), up from the prior projection of $5.07-$5.49 (implying a rise of 9-18% from the 2023 reported figure). The Zacks Consensus Estimate is pegged at $5.30.
Our Take
Integer Holdings exited the third quarter of 2024 with mixed results wherein earnings surpassed its consensus estimate and revenues missed the same. However, year-over-year top-line and bottom-line performances were impressive. Robust performances by the Medical segment and strength in all the product lines of the Medical segment were encouraging. The expansion of both margins bodes well for the stock.
Integer Holdings continued to benefit from strong demand across all markets and the InNeuroCo and Pulse acquisitions. These also look promising for the stock.
Following the divestiture of its non-medical business, Integer Holdings is likely to completely focus on its medical business segment with additional cash to pay down debt and execute its inorganic growth strategy.
ITGR’s Zacks Rank and Key Picks
Integer Holdings currently carries a Zacks Rank #4 (Sell).
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Quest Diagnostics has an estimated long-term growth rate of 6.8%. DGX's earnings surpassed estimates in each of the trailing four quarters, with the average being 3.3%.
Quest Diagnostics has gained 42% compared with the industry's 14.9% growth year to date.
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Integer Holdings Q3 Earnings Surpass Estimates, Revenues Up Y/Y
Integer Holdings Corporation (ITGR - Free Report) delivered adjusted earnings per share (EPS) of $1.43 in the third quarter of 2024, which improved 10.9% year over year. The figure topped the Zacks Consensus Estimate by 5.15%.
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 $1.01, reflecting an improvement of 21.7% year over year.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Revenues in Detail
Integer Holdings registered revenues of $431.4 million in the third quarter, up 8.7% year over year. The figure missed the Zacks Consensus Estimate by 2.7%.
Organically, revenues increased 4.3% year-over-year.
Robust Medical sales drove the company’s top line in the reported period.
Integer Holdings Corporation Price, Consensus and EPS Surprise
Integer Holdings Corporation price-consensus-eps-surprise-chart | Integer Holdings Corporation Quote
Segmental Analysis
Last month, ITGR announced an agreement to divest its Electrochem business, which focuses on non-medical applications for the energy, military and environmental sectors, to Ultralife Corporation for $50 million in cash. Per management, it started the non-medical business, treating it as a discontinued operation in the third quarter. The deal is expected to close by the end of October.
Medical Sales reported total revenues of $431.4 million, up 8.7% year over year on a reported and 4.3% on an organic basis. This figure compares to our Medical Sales third-quarter projections of $438.8 million.
Medical Sales has three product lines — Advanced Surgical, Orthopedics & Portable Medical (AS&O); Cardio and Vascular (C&V); and Cardiac Rhythm Management & Neuromodulation (CRM&N).
Integer Holdings’ AS&O revenues amounted to $25.3 million, up 11.6% year over year on a reported and down 1% on an organic basis. This is due to fulfillment timing of last-time-buy orders related to the planned multi-year Portable Medical exit announced in 2022. This compares to our third-quarter projections of $22.6 million for AS&O revenues.
Revenues of the C&V business totaled $241 million, up 12.6% from the prior-year quarter on a reported basis and up 6.2% organically. The solid year-over-year performance was driven by new product ramps in electrophysiology and structural heart, and the InNeuroCo and Pulse acquisitions. This compares to our third-quarter projections of $239.2 million.
Revenues of the CRM&N business were $165.1 million, up 3.1% year over year on a reported and 2.2% on an organic basis. The solid year-over-year performance was driven by strong growth in emerging neuromodulation customers with PMA (pre-market approval) products. This compares to our third-quarter projections of $177 million for the product line.
Margin Analysis
Integer Holdings generated a gross profit of $116.6 million in the third quarter, up 11% year over year. The gross margin in the reported quarter expanded 56 basis points (bps) to 27%. We had projected 27% of gross margin for the third quarter.
Selling, general and administrative expenses were $44.8 million, up 8.1% year over year. Research, development and engineering costs were $11.9 million in the quarter, down 15.2% year over year. Adjusted operating expenses of $56.7 million increased 2.2% year over year.
Adjusted operating profit totaled $75.6 million, reflecting a 17.1% uptick from the prior-year quarter. Adjusted operating margin in the third quarter expanded 125 bps to 17.5%.
Financial Position
Integer Holdings exited the third quarter of 2024 with cash and cash equivalents of $35.6 million compared with $34.1 million at the second-quarter end. Total debt (including the current portion) at the end of third-quarter 2024 was $1.08 billion compared with $1.12 billion at the second-quarter end.
Cumulative net cash flow from operating activities at the end of third-quarter 2024 was $141.9 million compared with $124.6 million a year ago.
2024 Guidance
Integer Holdings has revised its financial outlook for 2024 to exclude its Electrochem business.
For 2024, the company now expects revenues in the range of $1,707 million-$1,727 million (implying an improvement of 10-11% from the 2023 reported figure). The Zacks Consensus Estimate is pegged at $1.75 billion.
The company now expects full-year adjusted EPS in the band of $5.24-$5.43 (indicating a rise of 14-18% from the 2023 reported figure), up from the prior projection of $5.07-$5.49 (implying a rise of 9-18% from the 2023 reported figure). The Zacks Consensus Estimate is pegged at $5.30.
Our Take
Integer Holdings exited the third quarter of 2024 with mixed results wherein earnings surpassed its consensus estimate and revenues missed the same. However, year-over-year top-line and bottom-line performances were impressive. Robust performances by the Medical segment and strength in all the product lines of the Medical segment were encouraging. The expansion of both margins bodes well for the stock.
Integer Holdings continued to benefit from strong demand across all markets and the InNeuroCo and Pulse acquisitions. These also look promising for the stock.
Following the divestiture of its non-medical business, Integer Holdings is likely to completely focus on its medical business segment with additional cash to pay down debt and execute its inorganic growth strategy.
ITGR’s Zacks Rank and Key Picks
Integer Holdings currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space are Addus HomeCare (ADUS - Free Report) , Quest Diagnostics (DGX - Free Report) and RadNet (RDNT - Free Report) . While Addus HomeCare sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and RadNet carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Addus HomeCare has an estimated long-term growth rate of 12.1%. ADUS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 11.5%.
Addus HomeCare shares have rallied 85.5% compared with the industry's 16.9% growth year to date.
Quest Diagnostics has an estimated long-term growth rate of 6.8%. DGX's earnings surpassed estimates in each of the trailing four quarters, with the average being 3.3%.
Quest Diagnostics has gained 42% compared with the industry's 14.9% growth year to date.
RadNet’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 98.2%.
RDNT's shares have surged 93.7% year to date compared with the industry’s 14.8% growth.