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Integra Rides on Global Prospects, Hurt by Escalating Costs

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On Dec 21, 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 concerns.

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 31%, wider than the 13.6% 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 severely competitive environment further adds to the company's woes. In conclusion, the company's lowered 2018 revenue guidance fails to instill investor 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 expanding its business much faster than in the United States and also aiding certain parts of its international operations. In line with this strategy, the company is preparing to launch several products in China and Japan. Turning to Europe, management feels encouraged by the region's growth potential with respect to Tissue Technologies business and CUSA Clarity product, scheduled to be unveiled in Europe.

We are also upbeat about the company's Regenerative Technologies, the largest franchise under Orthopedics and Tissue Technologies. In the third quarter of 2018, 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 steady innovation to repel rivalry. Moreover, consolidation in the industry could lead to acute pricing pressure.

Zacks Rank & Key Picks

Integra LifeSciences carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical space are Veeva Systems Inc. (VEEV - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and OPKO Health, Inc. (OPK - Free Report) .

Veeva Systems’ long-term earnings growth rate is projected at 19.5%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Integer Holdings projects earnings growth rate of 31.2% for the fourth quarter. It currently carries a Zacks Rank #2 (Buy).

OPKO Health’s long-term earnings growth rate is projected at 12%. The stock presently carries a Zacks Rank of 2.

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