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Integra LifeSciences Grows Organically Amid Supply Issues

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On Feb 21, we issued an updated research report on Integra LifeSciences Holdings Corporation IART. The company has been noticing certain major developments overseas. However, a tough competitive landscape is a concern.

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 this Zacks Rank #3 (Hold) company have outperformed its industry in the past month. The stock has climbed 3.6% compared with the industry’s 1.4% rise.

In the final quarter of 2019, the company registered balanced segmental growth. The Codman Specialty Surgical segment grew 4.1%, whereas Orthopedics and Tissue Technologies revenues were up 1.3%. The impressive quarterly performance of DuraGen in Japan, following a third-quarter launch, instills optimism.

In the December-end quarter, revenues from the Codman Specialty Surgical segment climbed 5.6% organically aided by the completion of all integration activities related to the Codman acquisition, scale expansion, product launches, and venturing into faster-growing markets like China and Japan.

We are currently upbeat about the longer-term revenue contributions from the Arkis Biosciences and Rebound Therapeutics acquisitions. Expansion of both margins also contributed to the share-price rally.

Meanwhile, weaker sales in outpatient settings and the impact of supply constraints in the reported quarter are concerning. The company faces severe competition in the surgical implants and medical instruments market. It needs continued innovation to deflect rivalry. Moreover, consolidations in the industry might induce an intense pricing pressure.

Key Picks

Some better-ranked stocks from the broader medical space include Patterson Companies, Inc. PDCO, West Pharmaceutical Services, Inc. WST and DENTSPLY SIRONA, Inc. XRAY, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Patterson Companies has an expected long-term earnings growth rate of 6.4%.

West Pharmaceutical has an estimated long-term earnings growth rate of 14%.

DENTSPLY SIRONA has a projected long-term earnings growth rate of 11.6%.

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