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Teleflex (TFX) Up 4.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Teleflex (TFX - Free Report) . Shares have added about 4.5% in that time frame, outperforming the S&P 500.

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

Teleflex Gains Ground on Growth in All Lines in Q3

Teleflex 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.

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.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, Teleflex has an average Growth Score of C, however its Momentum Score is doing a bit better 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Teleflex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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