On Nov 28, we issued an updated research report on Integra LifeSciences Holdings Corporation (IART - Free Report) . The company has been seeing certain major developments overseas. However, a tough competitive landscape raises concern.
This New Jersey-based company is a leading developer, manufacturer and marketer of surgical implants and medical instruments for use in neurosurgery, extremity reconstruction, orthopedics and general surgery. Shares of the company have underperformed its industry over the past six months. The stock has lost 17.2% compared with the 0.4% decline of the industry.
Notably, Integra LifeSciences exited the third quarter of 2018 on a dull note with earnings in line and revenues missing the consensus mark. Significant gross margin contractions caused by escalating costs have been a major headwind. A tough competitive landscape further adds to the company’s woes. In conclusion, the company’s lowered 2018 revenue guidance fails to instill confidence in the stock.
On a positive note, Integra LifeSciences has been successfully growing overseas. International sales within Codman Specialty Surgical have been strong of late, driven by growth in core neurosurgery business and strength in certain key markets such as Japan and Canada. The same in turn, is offset by slightly soft sales in Europe. Per Integra LifeSciences, the acquisition of Codman is likely to effectively double the company’s international business within this segment. Within Orthopedics & Tissue Technologies, international sales rose in mid-single-digits during the last reported quarter, boosted by a solid foothold in Europe.
Integra LifeSciences is looking forward to investment opportunities in the Asian market for growing its business much faster than in the United States and also aiding certain parts of its international businesses. In line with this strategy, the company is preparing to launch several products in China and Japan. Turning to Europe, management feels encouraged about the region’s growth potential with respect to Tissue Technologies business and CUSA Clarity product scheduled to be launched in Europe.
We are also upbeat about the company’s Regenerative Technologies, the largest franchise under Orthopedics and Tissue Technologies. In the third quarter, the company registered double-digit growth in this franchise, primarily banking on broad-based strength across the portfolio.
Meanwhile, Integra LifeSciences faces intense competition in the surgical implants and medical instruments market. The company needs continuous innovation to fend off rivalry. Moreover, consolidation in the industry could lead to intense pricing pressure.
Zacks Rank & Key Picks
Integra LifeSciences carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader medical space are Integer Holdings Corporation (ITGR - Free Report) , Surmodics, Inc. (SRDX - Free Report) and Veeva Systems (VEEV - Free Report) .
Integer Holdings has an expected earnings growth rate of 31.2% for the fourth quarter 2018 and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Surmodics’ long-term earnings growth rate is projected at 10%. The stock carries a Zacks Rank of 2.
Veeva Systems’ long-term earnings growth rate is estimated at 19.3%. The stock is a Zacks #2 Ranked player at the moment.
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