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

Teleflex Incorporated TFX is gaining from a strong preference for the UroLift system. The company exited the first quarter of 2022 with better-than-expected results. Robust performance within the Vascular Access and Interventional businesses buoys optimism. However, weak margins and foreign exchange headwinds do not bode well.

In the past year, this Zacks Rank #3 (Hold) stock has declined 34.5% compared with a 29.2% fall of the industry and a 12.5% drop of the S&P 500 composite.

The renowned global medical device company has a market capitalization of $12.17 billion. Its first-quarter 2022 earnings surpassed the Zacks Consensus Estimate by 5.5%.

The company’s anticipated earnings growth rate of 10.7% for the next five years compared with the industry’s growth projection of 15.9% and the S&P 500’s estimated 10.8% rise.

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Zacks Investment Research


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Let’s delve deeper.

Key Drivers

Vascular Business Grows: Teleflex’s Vascular Access revenues rose 3.2% year over year at CER in the first quarter. The Peripherally Inserted Central Catheters (PICC) portfolio growth was in line with internal expectations. Within the Vascular Access business, the company recently received an award of a Sole Source Group Purchasing Agreement with Vizient for the supply of central venous access products. The agreement goes into effect in August 2022 and is expected to generate incremental revenue for Teleflex over the next several years.

The Interventional business registered net revenue growth of 2.3% at CER in the first quarter. The company continues to invest in its Interventional portfolio, including complex catheters and MANTA, its large bore closure device.

Urolift Holds Potential: Teleflex continues to see a strong preference for UroLift over other outpatient benign prostatic hyperplasia (BPH) treatments driven by strong clinical results. In terms of the international expansion strategy of UroLift, Teleflex initiated the launch of UroLift in Japan. The company also expects revised reimbursement in France and anticipates launch activities in select regions in Italy and Spain during the second half of 2022.

The UroLift 2, according to Teleflex, remains a vital margin driver and is perfectly positioned to generate approximately 400 basis points of UroLift gross margin expansion once the U.S. user base is fully converted.

Impressive Q1 Results: Teleflex’s first-quarter earnings and revenues topped the Zacks Consensus Estimate. The company generated 3.2% constant currency revenue growth year-over-year for the quarter under review. The company also exhibited year-over-year growth across the Americas, EMEA and Asia regions at CER. Teleflex’s high-growth portfolio, including the UroLift, MANTA, hemostatic products, EZ-IO, OnControl and PICCs, performed well in the first quarter.

The company’s reiterated revenues and adjusted earnings per share outlook for 2022, reflecting promising results compared with 2021 levels, instills investors’ confidence.

Downsides

Pandemic Hampers Growth: A resurgence in COVID-19 infections disrupted Teleflex’s business in the first quarter. Factors like deferrals of procedures, patient hesitation and patients and caregivers contracting COVID-19 had a negative impact on procedure volumes in January and early February of this year.

Margins Scenario Unfavorable: During the first quarter, Teleflex’ gross margin contracted 39 basis points (bps) to 53.9%. Overall, the adjusted operating profit was down 4.9% year over year. Adjusted operating margin saw a 107 bps contraction year over year to 16.5%.

Forex Woes Persist: Foreign exchange is a major headwind for Teleflex due to a considerable percentage of its revenues coming from outside the United States. The strengthening of the Euro and some other developed market currencies has been denting the company’s performance in the international markets.

Estimate Trend

In the past 30 days, the Zacks Consensus Estimate for Teleflex’s 2022 earnings has moved north to $13.97 by a penny.

The Zacks Consensus Estimate for 2022 revenues is pegged at $2.90 billion, suggesting a 3.2% rise from the 2021 reported number.

Key Picks

A few better-ranked stocks in the broader medical space are Alkermes plc ALKS, AMN Healthcare Services, Inc. AMN and Medpace Holdings, Inc. MEDP.

Alkermes has an estimated long-term growth rate of 25.1%. Alkermes’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alkermes has outperformed the industry in the past year. ALKS has gained 11% against the industry’s 46% decline in the said period.

AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts a Zacks Rank #1.

AMN Healthcare has outperformed its industry in the past year. AMN has gained 0.7% against the industry’s 53.5% fall.

Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2 (Buy).

Medpace has outperformed its industry in the past year. MEDP has declined 26% compared with the industry’s 53.5% fall.


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