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Why Is Integer (ITGR) Down 1.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Integer (ITGR - Free Report) . Shares have lost about 1.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Integer due for a breakout? 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.

Integer Holdings Q1 Earnings & Revenues Top Estimates

Integer Holdings Corporation reported first-quarter 2019 adjusted earnings of $1.00 per share, which surpassed the Zacks Consensus Estimate of 80 cents by 25%. The bottom line also surged 58.7% on a year-over-year basis.

Revenues increased 7.6% year over year to $314.7 million on a reported basis and outpaced the Zacks Consensus Estimate by 3.5%.

Segmental Analysis

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

Medical Sales
At the segment, reported revenues were $301.1 million, up 7.6% year over year. Revenues increased 8.2% 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

Integer Holdings’ Advanced Surgical, Orthopedics & Portable Medical segment has been divested to Viant. Consequently, revenues at the segment include net sales from the acquirer Viant under supply agreements associated with the divestiture.

Revenues amounted to $31.6 million, down 6.9% from the prior-year quarter. Further, the metric deteriorated 4.9% on an organic basis. Per management, the downside was owing to weaker performance by Portable Medical. However, solid demand in orthopedic markets partially mitigated the downside.

Cardio and Vascular

Revenues at the segment totaled $152.6 million, up 11.5% from the prior-year quarter and 12.1% organically. Per management, revenues increased primarily customer share gains and new product launches. Continued strong demand in the electrophysiology and peripheral vascular, and sustained demand for catheter components market fueled growth.

Cardiac/Neuromodulation

Revenues at this segment totaled $116.9 million, up 7.3% from the prior-year quarter. On an organic basis, revenues at the segment increased 7.3% year over year. Spinal cord stimulation and rising robust revenues from early-stage neuromodulation companies mainly contributed to the upside.

Non-Medical Sales

Reported revenues at the segment totaled $13.6 million, up 7% on both year over year and organic basis.

Margin Analysis

Integer Holdings generated a gross profit of $88.6 million in the first quarter, up 6.1% year over year. As a percentage of revenues, gross margin in quarter contracted 40 bps to 28.2%.

Selling, general and administrative expenses (SG&A) were $34.9 million, down 4% year over year.
 
Research, development and engineering costs grossed $11.6 million in the quarter, down 12.7% year over year.

Total operating income amounted to $39.2 million, up 30.4% year over year. Adjusted income from operations totaled $25.1 million, surging 36.2% year over year.

Operating margin in the quarter under review was 12.4%, up 210 bps year over year.

Guidance Revised

For 2019, adjusted earnings are expected in the range of $4.15-$4.35 (up from the previously guided range of $4.05-$4.25 per share), indicating an improvement of 9-14% from the previous year. The mid-point of the latest guidance range of $4.25 is higher than the Zacks Consensus Estimate of $4.21.

On a reported basis, Integer Holdings expects 2019 earnings to range between $2.87 and $3.07 (up from the prior band of $2.77-$2.97 per share), suggesting a whopping growth of 99-113% year over year.

For 2019, Integer Holdings expects reported revenues between $1.26 billion and $1.28 billion, reflecting year-over-year growth of 4-5%. On an adjusted basis, the company expects revenues in the same band, suggesting an improvement of 4-6% from the previous year. Notably, the mid-point of the guidance is in line with the Zacks Consensus Estimate of $1.27 billion.
 
Adjusted income from operations is anticipated between $137 million and $144 million (up from the previously guided range of $134-$141 million), indicating year-over-year rise of 10-16%.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Integer has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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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