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Integer Holdings (ITGR) Beats on Q2 Earnings, '18 View Solid

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Integer Holdings Corporation (ITGR - Free Report) reported adjusted earnings of $1.06 per share in the second quarter of 2018, up 43% year over year. Further, earnings beat the Zacks Consensus Estimate of 90 cents.

Revenues rose 12% year over year to $314 million on a reported basis and missed the Zacks Consensus Estimate of $382 million. Notably, adjusted sales from continuing operations were $313 million.

Sales grew on a reported and adjusted basis, courtesy of solid performances by the company’s Cardio and Vascular business. The stock has a Zacks Rank #1 (Strong Buy).

Integer Holdings Corporation Price, Consensus and EPS Surprise


Segmental Analysis

Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.

Medical Sales

Reported sales at the segment were $299.5 million, up 12.9% year over year. Revenues increased 12.4% on an organic basis.

Medical Sales has three sub-segments — Advanced Surgical, Orthopedics and Portable Medical; Cardio and Vascular; and Cardiac/Neuromodulation.

Advanced Surgical, Orthopedics and Portable Medical

Revenues amounted to $34.8 million, up 22.9% from the prior-year quarter on a reported basis. On a comparable organic constant-currency basis, Advanced Surgical, Orthopedics & Portable Medical revenues rose 21% year over year. This was primarily driven by stable performance in the Portable Medical space and launches under the orthopedics and arthroscopic platforms.

Cardio and Vascular

Revenues at the segment totaled $148.8 million, up 13.8% from the prior-year quarter. The upside was supported by strong demand for existing OEM product lines and contract components. On a comparable organic constant-currency basis, revenues improved 13.1% over the prior year. The figure was primarily driven by higher demand for electrophysiology and vascular access products.


Revenues at this segment totaled $115.9 million, up 9.2% from the prior-year quarter. On a comparable organic constant-currency basis as well, revenues increased 9.2%.

Non-Medical Sales

Reported sales in the segment totaled $15 million, down 4.7% year over year on a reported and organic basis.

Margin Analysis

Integer Holdings generated gross profit of $98.8 million in the second quarter, up 10.8% year over year. As a percentage of revenues, gross margin in quarter contracted 30 basis points (bps) to 31.4%.

Selling, general and administrative expenses (SG&A) were $36.8 million, up 4.6% year over year.

Research, development and engineering costs totaled $12.9 million in the quarter, up 15.1% year over year.

Total operating income in the quarter under review was $44.4 million, up 23% year over year.


Adjusted earnings per share are projected in the range of $3.35 to $3.65, up from the previous guidance of $3.20-$3.50. This reflects growth of 9-19% year over year. The Zacks Consensus Estimate for 2018 adjusted earnings is currently pegged at $3.47, within the range.

Adjusted sales are anticipated between $1.18 billion and $1.20 billion, indicating growth of 4-6%. The current guidance is significantly higher than the previous guidance of $1.51 billion to $1.55 billion. Meanwhile, the Zacks Consensus Estimate is pinned at $1.36 billion, which is considerably below the projected range.

Adjusted EBIDTA is expected between $255 million and $265 million, reflecting an improvement of 9-13%.

Bottom Line

Integer Holdings ended the second quarter on a favorable note. A strong guidance instills investors’ optimism. The company is riding high on strong organic growth as well. The Cardio & Vascular arm has been delivering a solid performance. The divestment of the Advanced Surgical, Orthopedics & Portable Medical wing to Viant (formerly MedPlast LLC) is expected to prove profitable in the quarters ahead. Meanwhile, the company has a multi-year plan for long-term developments in place. An impressive guidance, declining operating expenses and the clearing of debt are other major positives.

On the flip side, declining sales at the Non-Medical segment is concerning. The recent loss of some major customers and intense competition in the niche space are other concerns. Moreover, owing to persistent decline in reimbursement, the company expects rental revenue per patient to decline in the quarters ahead.

Q2 Earnings of MedTech Majors at a Glance

Other top-ranked stocks in the broader medical space, which reported solid earnings this season, are Stryker Corporation (SYK - Free Report) , Intuitive Surgical, Inc (ISRG - Free Report) and Illumina, Inc (ILMN - Free Report) .

While Intuitive Surgical and Illumina sport a Zacks Rank #1, Stryker carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported adjusted earnings of $2.76 per share in the second quarter of 2018, which beat the Zacks Consensus Estimate of $2.48. Adjusted earnings improved 38% year over year.

Stryker reported second-quarter 2018 adjusted earnings per share of $1.76, beating the Zacks Consensus Estimate by 1.7%. Earnings improved 15% year over year and also exceeded the high end of the company’s guidance.

Illumina reported adjusted earnings of $1.43 per share, beating the consensus mark of $1.11.

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