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Teleflex (TFX) Q3 Earnings Surpass Estimates, EPS View Up

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Teleflex Incorporated (TFX - Free Report) announced earnings per share (EPS) from continuing operations of $2.52 for the third quarter of 2018, up 18.9% year over year. Also, the bottom line surpassed the Zacks Consensus Estimate by 4.6%.

Net revenues in the reported quarter rose 14% year over year to $609.7 million. Moreover, the top line edged past the Zacks Consensus Estimate by a marginal 0.07%.

On a year-over-year basis, the company saw organic constant currency revenue growth of 5.6% including a benefit of 1% from increased sales of Vascular Solutions products and a contribution of 4.6% from legacy Teleflex product line.

Revenues in Detail

Teleflex’s Vascular North America segment recognized net revenues of $80.7 million, up 7.8% year over year at constant exchange rate or CER. Despite a decrease in sales volumes of existing products, the growth was primarily attributable to improved sales volumes of existing products and better new product sales.

The Interventional North America business registered net revenues of $66.7 million, a 9.9% rise on a year-over-year basis at CER. This upside was fueled by increased sales volumes of existing products and higher new product sales.

Teleflex Incorporated Price, Consensus and EPS Surprise

Teleflex Incorporated Price, Consensus and EPS Surprise | Teleflex Incorporated Quote

Within Anesthesia North America, net revenues climbed 4.8% at CER to $53.2 million. Growth in sales volumes of existing products and stronger new product sales during the third quarter were partially offset by price declines.

Surgical North America realized net revenues of $42.5 million, a 4.6% rise at CER on increased sales volumes of existing products and a climb in new product sales.

Meanwhile, EMEA grossed revenue growth of 2.9% at CER to $139.6 million, driven by a beneficial price improvement and more solid new product sales. However, this was partially offset by lower sales volumes of existing products.

Asia, OEM and All Other logged net revenues of $76.5 million, $54.9 million and $95.6 million, respectively (corresponding top-line growth of 6.7%, 13.1% and 103% each at CER), in the quarter under review.

Margin

Gross margin of 56.2% during the quarter under discussion was up 98 basis points (bps) year over year on 16% improvement in gross profits. Adjusted operating margin contracted 400 bps to 16.6% on 30.4% escalation in operating cost.

Liquidity Position

The company exited the third quarter with cash and cash equivalents of $356.3 million compared with $346.3 million at the end of the second quarter. Year to date, net cash provided by operating activities was $302.9 million compared with $319.7 million in the year-ago period.

Outlook

Teleflex lowered its guidance for 2018 revenue growth to a range of 13.5-14.5% from the earlier-announced band of 14-15%. This revision reflects an anticipated 1.5% favorable impact of foreign exchange translation (earlier, the projection was a 2% conducive effect). On constant currency basis, the company reaffirmed its full-year view of 12-13% over the prior-year’s expected range.

The company, however, raised its forecast for full-year adjusted earnings per share from continuing operations in the $9.80-$9.95 band (earlier prediction was $9.70-$9.90), representing an approximately 5% positive impact from forex fluctuations.

Our Take

Notably Teleflex continues to report a robust improvement in revenues, banking on balanced growth across all segments and geographies. The company’s newly-acquired NeoTract has started to contribute to its top line quite handsomely. We are also upbeat about Urolift that has continued with its sturdy momentum in the third quarter, delivering $49 million to revenues, an approximate 45% increase compared with the prior-year period’s tally.

Zacks Rank & Key Picks

Teleflex carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space, which have already reported better-than-expected earnings this reporting cycle, are Intuitive Surgical (ISRG - Free Report) , Stryker Corporation (SYK - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) . All stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted EPS of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues summed $920.9 million, also surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, steering past the Zacks Consensus Estimate of $1.68. Operating margin was 17.8%, up 30 bps.

Merit Medical released third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million slightly outperformed the consensus estimate of $218 million.

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