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Teleflex Analyst Day Excerpts

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Recently, Teleflex Incorporated (TFX - Free Report) unveiled long-term growth plans during its annual investor and analyst day. The company also provided preliminary financial outlook for 2013.


Teleflex reiterated its guidance for 2012. Revenues are expected to grow in the range of 6% to 7% in constant currency. The company envisages adjusted diluted earnings per share from continuing operations in the band of $4.35 and $4.40 for 2012. The current Zacks Consensus Estimate of $4.39 for 2012 is within the Teleflex guidance range.

The global leader in medical devices used in critical care and surgery also provided preliminary guidance for 2013. Annual sales growth is forecast in the range of 11% to 13% for 2013, including the accretion from its recent LMA buyout. Foreign exchange headwinds are expected to hurt sales growth by 1% in 2013.

The company envisages adjusted earnings per share in the band of $4.70 and $4.90 for 2013, implying annual growth in the range of 7% to 13%. The current Zacks Consensus Estimate of $4.85 for 2013 is within the Teleflex guidance range.

Moreover, gross margin is expected in the range of 50% to 51% in 2013. Adjusted operating margin is expected in the range of 16% to 17% (after accounting for the 1% negative impact from medical device tax).

Long-term Goals

Firstly, Teleflex continues to build a strong operating platform to support future growth. Its effort to expand foothold in higher-growth markets like China and Brazil coupled with a portfolio geared to meet the needs of non-elective procedures is likely to accelerate its growth in the future.

Secondly, the company envisages sales growth to surpass the market growth rate. It also plans to gain market share in key product areas. Product innovation is the driving force for Teleflex. Contributions from newer products in the most recent quarter reflect gains from the company’s increased focus on research and development. Moreover, portfolio expansion via inorganic route has historically bolstered Teleflex’s financial performance.

Thirdly, Teleflex continues to expand its margins. It expects to achieve gross margin in the ballpark of 57% while operating margin is envisaged around 25% in the long-term. The company aims to achieve its goal of margin expansion on the back of lower costs and reduction in operational footprint.

Improvement in pricing environment is another upside to achieve margin expansion. The company has been progressively raising prices for its offerings. In the third quarter, Teleflex witnessed a 200 basis point expansion in pricing in the Asian market.

Our Take

Teleflex’s aggressive portfolio extension has been the crux of the company’s growth profile. Meanwhile, the recent divestiture of its OEM Orthopedic division will allow Teleflex to leap on the growth trajectory as it is expected to aid the company strategy of new product introduction, and investment in innovative technologies. Moreover, demographic trends and barriers to entry in the industry should bolster organic growth rates at Teleflex.

However, Covidien , C.R. Bard and CareFusion , which operate in similar business segments, present a tough competitive landscape for Teleflex. Another factor weighing on the company is that demand for its products is susceptible to healthcare reimbursement systems in the domestic as well as international markets.

We currently have a long-term ‘Neutral’ recommendation on the stock which carries a short-term Zacks #2 Rank (Buy).

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