Back to top

Integra (IART) Q3 Earnings Meet Estimates, Revenue View Dips

Read MoreHide Full Article

Integra LifeSciences Holdings Corporation (IART - Free Report) delivered adjusted earnings per share (EPS) of 59 cents in the third quarter of 2018, up 31.1% from the year-ago figure. However, the same remained in line with the Zacks Consensus Estimate.

Revenue Discussion

Total revenues in the reported quarter surged 31.2% year over year to $365.9 million but lagged the Zacks Consensus Estimate of $371 million. Excluding revenues from Codman acquisitions, divestitures and the effect of currency exchange rates, organic revenues rose 6.2% year over year.

Progress with the company’s Codman integration and consistent growth with the channel expansion strategy, particularly in Regenerative Technologies, strongly contributed to the company’s third-quarter performance.

Coming to product categories, revenues from the company's Codman Specialty Surgical segment soared 45.1% to $239 million. Improvement came primarily on the back of the Codman consolidation and a solid performance in the Dural Access and Repair, Advanced Energy and Neuro Monitoring businesses.

Orthopedics and Tissue Technologies revenues came in at $127 million in the third quarter, up 11.2% year over year. This upside is fueled by a continued drive in Regenerative Technologies and Private Label businesses.

Margin Trend

Gross margin contracted 266 basis points (bps) to 60.8% in the reported quarter despite a 25.7% rise in gross profit to $222.6 million. Selling, general and administrative expenses increased 18.8% to $173.4 million in the quarter under review while research and development expenses rose 35.1% to $20.3 million. However, adjusted operating margin saw a 214-bps expansion to 7.9% in the third quarter.

Financial Position

Integra LifeSciences exited third-quarter 2018 with cash and cash equivalents of $205.9 million, up from $183.8 million at the end of the second quarter. Year to date, net cash flow from operating activities was $156.9 million, up from $102.9 million in the year-ago period.

2018 Outlook

The company has lowered its full-year revenue guidance to $1.467-$1.472 billion (earlier, the range was $1.475-$1.49 billion). The Zacks Consensus Estimate for 2018 revenues of $1.49 billion remains above the guided range. Per Integra LifeSciences, the view has been trimmed on expectation of approximately 4% organic growth for 2018 as compared to the previous projection of nearly 5%.

However, the company reiterates its full-year forecast for adjusted earnings per share within $2.36-$2.42. The Zacks Consensus Estimate for the metric is pegged at $2.40, falling under the company’s envisioned range.

Our Take

Integra LifeSciences exited the third quarter of 2018 on a dull note with earnings in line and revenues missing the Zacks Consensus Estimate. However, a strong year-over-year rise in the top line on the back of the company’s recent acquired business buoys optimism.

We are also encouraged by the company’s balanced segmental year-over-year revenue growth in the third quarter. Integra LifeSciences’ advancement with its channel expansion strategy as well as Codman integration raises investor hope. Notably, a year ago, the company announced plans within its Orthopedics and Tissue Technologies segment to expand its sales channel, improve focus and competitiveness plus better align the product portfolio with clinical customers.

We believe, the company is trying to execute its growth plan through an efficient management team. Moreover, higher year-over-year investments in research and development are encouraging. The company’s promising view also instills confidence in the stock.

However, significant gross margin contractions caused by escalating costs are concerns. The updated 2018 outlook does not look much promising either.

Zacks Rank & Key Picks

Integra LifeSciences carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , Humana Inc. (HUM - Free Report) and Inogen, Inc. (INGN - Free Report) .

Henry Schein is expected to release third-quarter 2018 results on Nov 6. The Zacks Consensus Estimate for adjusted EPS is $1.01 and for revenues, $3.35 billion. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Humana is likely to release third-quarter 2018 results on Nov 7. The Zacks Consensus Estimate for the quarterly EPS is pegged at $4.29 and for revenues, stands at $13.97 billion. The stock holds a Zacks Rank of 2.

Inogen is slated to release third-quarter 2018 results on Nov 6. The Zacks Consensus Estimate for EPS is projected at 52 cents and for revenues, at $91.08 million. The stock sports a Zacks Rank #1 (Strong Buy).

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>



More from Zacks Analyst Blog

You May Like

Published in