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Here's Why You Should Avoid Betting on Integer Holdings Now

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Zacks Equity Research
·3 min read
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Integer Holdings Corporation’s ITGR weak segmental and operational performance in second-quarter 2020 failed to impress investors. Moreover, intense competition in the MedTech space remains a concern.

The Zacks Rank #5 (Strong Sell) company — with a market capitalization of $1.93 billion — manufactures and develops medical devices and components primarily for original equipment manufacturers (OEMs), which depend on it to design, develop and produce intellectual property protected medical device technologies. Shares the company have lost 22.3% against the industry’s growth of 20.1% in a year’s time. Meanwhile, the S&P 500 Index has rallied 11% in the same timeframe.

Factors Hurting the Stock

Integer Holdings witnessed weak segmental and operational performance in second-quarter 2020.

With respect to segments, both Medical Sales and Non-Medical Sales experienced decline in revenues. At Medical Sales, revenues were $231.4 million, down 22.2% year over year. Moreover, revenues declined 22.8% from the prior-year quarter on an organic basis. Reported revenues at Non-Medical Sales segment totaled $8.7 million, down 47.6% on both year-over-year and organic basis.

Integer Holdings generated a gross profit of $57.9 million in the second quarter, down 40.3% year over year. As a percentage of revenues, gross margin in quarter contracted 680 basis points (bps) to 24.1%.

Total operating income amounted to $9.2 million, which plunged 81.4% year over year. Operating margin in the quarter under review was 3.8%, down 1190 bps year over year.

Integer Holdings generates the majority of revenues from cardiac, neuromodulation, orthopedics, vascular, advanced surgical and power solutions markets. The company faces intense competition in those areas from players like Medtronic, Boston Scientific, Stryker, Smith & Nephew and ConvaTec. Consequently, stiff competition continues to intensify and impact the company’s prospects. 

Which Way Are Estimates Headed?

For 2020, the Zacks Consensus Estimate for revenues is pegged at $1.08 billion, indicating a decline of 14.5% from the prior-year quarter. The same for earnings stands at $2.65 per share, suggesting a fall of 43.4% from the year-ago reported figure.

Stocks to Consider

Some better-ranked stocks from the broader medical space include Merit Medical Systems, Inc. MMSI, Thermo Fisher Scientific Inc. TMO and CONMED Corporation CNMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Merit Medical has a projected long-term earnings growth rate of 12%.

Thermo Fisher has an estimated long-term earnings growth rate of 15%.

CONMED has a projected long-term earnings growth rate of 10.8%.

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CONMED Corporation (CNMD) : Free Stock Analysis Report
Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report
Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
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