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Integra (IART) Down 2.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Integra LifeSciences (IART - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Integra due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Integra LifeSciences Posts In Line Earnings, Revenues View Down

Integra LifeSciences 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.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Integra has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Integra has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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