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Here's Why You Should Hold on to Teleflex (TFX) Stock for Now

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Teleflex Incorporated (TFX - Free Report) has been gaining from robust segmental and international growth. However, the company incurred adjusted operating loss in the third quarter of 2019, which is concerning.

Over the past year, shares of the Zacks Rank #3 (Hold) company have outperformed its industry. The company has gained 45.8% compared with 14.8% growth of its industry. Also, it has outperformed the S&P 500’s 24.2% rally during the same period.

The renowned provider of medical technology products has a market capitalization of $74 billion. The company projects 14.3% growth for the next five years and expects to maintain its strong segmental performance. Further, it surpassed earnings estimates in three of the trailing four quarters, delivering a positive surprise of 3.5%, on average.

 


 

Let’s delve deeper.

Q3 Results: We are upbeat about Teleflex’s better-than-expected third-quarter 2019 performance. Teleflex’s recent performance in the EMEA and the Asia Pacific, backed by robust improvement in revenues on balanced growth across the majority of segments and all geographies buoys optimism. The continued momentum for UroLift in the third quarter is impressive as well. The expansion of gross margin also buoys optimism. A raised revenue guidance, on a constant-currency basis, is an added positive.

Inclusion of NeoTract: We are optimistic about the robust performance of NeoTract, Teleflex’s acquired business. In the third quarter, the Interventional Urology business witnessed impressive growth on NeoTract’s continued strong momentum. We are also optimistic about the continued market adoption of the FDA-approved UroLift System. Teleflex is also working toward a limited launch of UroLift in mid-to-late 2020 in Japan, after it received the Shonin approval.

Vascular Solution Synergy: We are optimistic about accelerating growth of the company’s vascular and interventional access product portfolios. Vascular Solutions (acquired in February 2017) has been instrumental in expanding Teleflex’s outreach in the coronary and peripheral vascular market. It has also been generating increased cross-portfolio selling opportunities for the company.

Downsides:

Escalating Expenses: Teleflex’s top-line growth in the reported quarter was partially offset by continued rising expenses on increased research and development expenses. Further, the company implemented various restructuring, realignment and cost-reduction initiatives — including facility consolidations, organizational realignments and reductions in workforce. These expenses are, in a way, putting pressure on Teleflex’s operating margin.

Competitive Landscape: The company competes with various types of companies, ranging from small start-up enterprises to larger and more established companies with access to significantly greater financial resources. Also, extensive product research and development, and rapid technological advances characterize the market it operates in.

Estimate Trend

Teleflex is witnessing a positive estimate revision trend for the year 2019. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 0.5% north to $11.08.

The Zacks Consensus Estimate for the company’s fourth-quarter 2019 revenues is pegged at $654.7 million, suggesting 6.7% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Haemonetics Corporation (HAE - Free Report) , Medtronic plc (MDT - Free Report) and Hill-Rom Holdings, Inc (HRC - Free Report) .

Haemonetics has a projected long-term earnings growth rate of 13.5%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Medtronic’s long-term earnings growth rate is estimated at 7.4%. The company presently carries a Zacks Rank #2 (Buy).

Hill-Rom’s long-term earnings growth rate is estimated at 11.7%. It currently carries a Zacks Rank #2.

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