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Why Is Integer (ITGR) Up 5.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Integer (ITGR - Free Report) . Shares have added about 5.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Integer 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 drivers.

Integer Holdings (ITGR - Free Report) Beats on Q3 Earnings, Non-Medical Sales Down

Integer Holdings Corporation reported third-quarter 2018 adjusted earnings of $1.06 per share, outpacing the Zacks Consensus Estimate by 15.2%. Earnings rose 16.5% on a year-over-year basis.

Revenues improved 6.9% year over year to $305.1 million on a reported basis and surpassed the Zacks Consensus Estimate of $292 million.

Segmental Analysis

Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.

Medical Sales

Reported sales at the segment were $292.6 million, up 8% year over year. Revenues increased 8.7% on an organic basis.

Medical Sales has three sub-segments — Advanced Surgical, Orthopedics and Portable Medical (AS&O); Cardio and Vascular; and Cardiac/Neuromodulation.

Advanced Surgical, Orthopedics and Portable Medical

Revenues amounted to $32.8 million, up 3.4% from the prior-year quarter. Notably, the segment grew 8.9% on an organic basis. Per management, the upside was driven by solid market demand.

Cardio and Vascular

Revenues at the segment totaled $150.2 million, up 9.1% from the prior-year quarter and 9.2% organically. Per management, sales increased primarily on continued strong demand in the electrophysiology market and product launches.

Cardiac/Neuromodulation

Revenues at this segment totaled $109.6 million, up 7.9% from the prior-year quarter. On an organic basis, the segment grew 7.9%. However, management expects a drop in sales in the fourth quarter of 2018.

Non-Medical Sales

Reported sales in the segment totaled $12.4 million, down 17.7% on both year over year and organic basis. Per management, the deterioration was caused due to North American drilling activity and planned phase out of certain rechargeable battery pack products.

Margin Analysis

Integer Holdings generated gross profit of $91.9 million in the third quarter, up 3.1% year over year. As a percentage of revenues, gross margin in quarter contracted 110 basis points (bps) to 30.1%.

Selling, general and administrative expenses (SG&A) were $34.1 million, down 2.8% year over year.

Research, development and engineering costs totaled $12.2 million in the quarter, up 0.1% year over year.

Total operating income in the quarter under review was $41.5 million, up 15.7% year over year. Adjusted income from operations totaled $45.6 million, up 8.8% year over year.

Adjusted operating margin was 14.9%, up 30 bps year over year.

Financial Condition

Integer Holdings exited the third quarter with cash and cash equivalents of $22.9 million. The company paid down $595 million of debt, of which $548 million was used from the divestiture of the AS&O Product Line.

Guidance

For 2018, Integer Holdings expects reported revenues between $1,197 million and $1,212 million, reflecting year-over-year growth of 5-7%. On an adjusted basis, the company expects revenues in the band of $1,195-$1,210 million, showing growth of 6-7% from the previous year.

Adjusted earnings per share are expected within $3.55 to $3.70, indicating a rise of 15-20% from the previous year. The Zacks Consensus Estimate is pinned at $3.62, within the guided range.

Adjusted income from operations is anticipated between $117 million and $122 million showing year-over-year rise of 18.

Adjusted EBITDA is projected between $255 million and $265 million, up 9-13% year over year.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -5.18% due to these changes.

VGM Scores

At this time, Integer has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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

Integer has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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