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Here's Why You Should Hold Integer Holdings in Your Portfolio

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With a market capitalization of approximately $2.57 billion, Integer Holdings Corporation (ITGR - Free Report) is expected to benefit from Cardio & Vascular, Neuromodulation and Non-Medical Electrochem markets. However, declining rental revenues and intense competition are expected to be major headwinds.

Here we take a quick look at the primary factors that have been plaguing the company and discuss the prospects that ensure near-term recovery of the stock.

Why Should You Retain?

Integer Holdings recently announced a strategy to drive sales and profit growth, following a comprehensive strategic review of the business. The strategy involves two overarching themes that are focused on portfolio management and operational excellence to enhance patient lives.

As part of its Portfolio Management strategy, the company has identified multiple focus areas for its product lines. The company plans to invest more in Cardio & Vascular, Neuromodulation as well as Electrochem to accelerate sales and market penetration. Integer Holdings has also been enhancing profitability in the areas of Advanced Surgical, Orthopedics and Power Solutions through focused sales growth as well as cost-structure initiatives.

As a result of continued operational excellence, the company has been registering profits. At the end of the second quarter of 2018, it generated gross profit of $98.8 million, up 10.8% year over year. As a percentage of revenues, gross margin 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.

In the past year, Integer Holdings has outperformed the industry. The stock has surged 71.2%, against the industry's decline of 1.2%. Moreover, the current level is also higher than the S&P 500 index's gain of 15%.

What’s Deterring the Stock?

The presence of a large number of players has made the medical devices market highly competitive. Integer Holdings generates a major portion of revenues from cardiac, neuromodulation, orthopedics, vascular, advanced surgical and power solutions markets. The company faces intense competition in those areas from players around the globe.

Which Way are the Estimates Treading?

For the current quarter, the Zacks Consensus Estimate for earnings is pegged at 92 cents, reflecting growth of 12.2% on a year-over-year basis. The same for the revenues is pegged at $292 million, reflecting a decline of 19.6% year over year.

For 2018, the Zacks Consensus Estimate for revenues is pegged at $1.24 billion, reflecting a fall of 15%. The same for adjusted earnings for 2018 is pegged at $3.57, indicating year-over-year rise of 27.1%.

The stock has a Zacks Rank #3 (Hold).

Integer Holdings Corporation Price and Consensus

 

Key Picks

A few better-ranked stocks in the broader medical space are Surmodics, Inc (SRDX - Free Report) , Masimo Corporation (MASI - Free Report) and Veeva Systems (VEEV - Free Report) .

Surmodics has a long-term expected earnings growth rate of 10%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Masimo’s long-term earnings growth rate is projected at 14.8%. The stock carries a Zacks Rank #2.

Veeva Systems’ long-term earnings growth rate is estimated at 19.3%. The stock sports a Zacks Rank #1.

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