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Can Segmental Strength Drive Integra's (IART) Q4 Earnings?

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Integra LifeSciences Holdings Corporation (IART - Free Report) is scheduled to report fourth-quarter 2017 results on Feb 27, before the market opens.

In the third quarter, Integra LifeSciences derived 41% of its total revenues from the Orthopedics and Tissue Technologies business. Let us take a sneak peek at what the fourth-quarter earnings season is expected to bring forth for this business segment.

How Is Orthopedics and Tissue Technologies Placed?

Notably, Regenerative Technologies is the largest franchise under Orthopedics and Tissue Technologies. In third-quarter 2017, the company registered mid-single digit growth in this franchise, primarily banking on the addition of Derma Sciences and strong growth in inpatient skin portfolio. Organic sales, excluding effects of storm-related disruption, increased 6%.

Management is hopeful about gaining from continued strength in this business in fourth-quarter 2017 as well. Accordingly, the Zacks Consensus Estimate for Orthopedics and Tissue Technologies revenues of $123 million reflects an increase of 33.8% from the year-ago quarter.

We encouragingly note that, in the fourth-quarter 2017, Integra LifeSciences introduced several products that have broadened its portfolio of solutions in the U.S. hernia repair market and in the European breast reconstruction market. In this regard, the company launched collagen matrices — Revize/Revize-X — for plastic and reconstructive surgery.

Integra LifeSciences Holdings Corporation Price and EPS Surprise



Available in solid and 2:1 meshed configuration, Revize/Revize-X Collagen Matrix are derived from fetal bovine dermis which contains high levels of Type III collagen. Per the company, Revize/Revize-X will aid in implanting and strengthening weak soft tissue along with surgical repairing of damaged or ruptured soft tissue membranes.

Solidifying its footprint in plastic and reconstructive surgery, this global medical technology company recently announced the launch of a collagen matrix SurgiMend PRS Meshed — featuring a 2: 1 meshing pattern. In a parallel release, Integra LifeSciences announced the launch of SurgiMend PRS Meshed for pre- and sub-pectoral breast reconstruction in Europe. These developments should boost the company’s revenue in the fourth quarter itself.

Integra LifeSciences’ efforts to grow in the plastic and reconstructive surgery market seem to be strategic, per Technavio data published in Business Wire. Per the report, the global plastic surgery products market is expected to reach a value of around $15 billion, at a CAGR of 9% between 2016 and 2020. Thus, the latest launches will help Integra LifeSciences cash in on the opportunities in this niche market and boost the top line in the to-be-reported quarter.

We note that the company has been seeing considerable progress in its extremity product line. Last March, Integra LifeSciences announced full commercial expansion of its Cadence Total Ankle System. The company developed the ankle prosthesis in collaboration with renowned foot and ankle surgeons. The Cadence Total Ankle System was made fully available in the United States, Canada and select European countries. 

In the same month, the company launched Titan Press-Fit Reverse Shoulder for Fracture. The latest introductions are expected to help the company gain traction.

Preliminary Results

Notably, Integra LifeSciences reported preliminary, unaudited revenues of approximately $365 million in the fourth quarter of 2017, up 40% year over year. The preliminary revenue figure is nominally higher than the Zacks Consensus Estimate of $364.9 million.

Per management, the stellar quarterly performance was strongly backed by strong organic growth at the Orthopedics and Tissue Technologies business.

Integra LifeSciences expects fourth-quarter adjusted earnings per share to cross the high end of the guidance.

Here is what our quantitative model predicts:

Integra LifeSciences has the right combination of two main ingredients — a positive Earnings ESP  and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for increasing the odds of an earnings beat.

Zacks ESP: The Earnings ESP for Integra LifeSciences is +2.66%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Integra LifeSciences’ Zacks Rank #3 increases the predictive power of ESP.

Moreover, the Zacks Consensus Estimate for earnings of 57 cents reflects a 9.6% rise on a year-over-year basis.

Other Stocks to Consider

Here are a few other medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

Universal Health Services (UHS - Free Report) has an Earnings ESP of +1.96% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

NuVasive, Inc. (NUVA - Free Report) has an Earnings ESP of +0.51% and a Zacks Rank #3.

The Cooper Companies, Inc. (COO - Free Report) has an Earnings ESP of +0.04% and a Zacks Rank #3.

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