Here's Why Investors Should Retain Integra (IART) Stock Now
Integra LifeSciences Holdings Corporation IART is well-poised for growth in the coming quarters, backed by its performance in international markets. The company is seeing health demand for its industry-leading products within the Codman Specialty Surgical (“CSS”) business. A highly solvent balance sheet further buoys optimism.
However, headwinds from the Boston recall have impacted the company’s results of operation, which is concerning. The impacts of foreign currency fluctuations may further affect Integra’s performance outside the United States.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 14.7% compared with the industry’s 2.9% fall and the 13.3% increase of the S&P 500 composite.
The renowned medical device company has a market capitalization of $3.07 billion. Integra has an earnings yield of 8.32% against the industry’s yield of -7.66%. The company’s earnings surpassed estimates in three of the trailing four quarters and was breakeven in one, delivering an average surprise of 11.27%.
Let’s delve deeper.
Tailwinds
Solid Growth in the International Business: In spite of facing foreign exchange fluctuations across its non-U.S. business, Integra is successfully broadening its international footprint through certain key developments on the overseas front. International sales within CSS have been strong recently, driven by growth in the core neurosurgery business and strength in certain key markets, such as Europe, Canada, China and Japan. Per IART, the acquisition of Codman is effectively doubling the company’s international business within the CSS segment.
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On a global basis, Integra accelerated investments in digital capabilities, which will enable commercial teams to reach a broader customer base. Also, the company has added specialists in neuromonitoring, hydrocephalus and seven regenerative areas.
Strong Prospects of CSS: Within CSS management, the company continues to benefit from the strong market adoption of programmable valves and advanced energy (key revenue-generating products are CUSA Capital, Mayfield, DuraGen, Certas Plus programmable valves, Bactiseal catheters and instruments).
The company has expanded the international reach of the CUSA and DuraGen portfolios and bolstered the clinical evidence for its Bactiseal catheters in the European market. In CereLink, Integra has made progress in resolving the electrical interference issue in its monitors and now expects to relaunch it in the international market in the late third quarter of 2023 and in the United States in the late fourth quarter of 2023.
Favorable Solvency: At the end of the second quarter of 2023, Integra reported cash and cash equivalents of $309 million against $96 million of short-term payable debt, indicating a sound financial position. As of Jun 30, 2023, the company had a total debt (including the current portion) of $1.43 billion on the balance sheet.
Headwinds
Boston Product Recall Dents Growth: In May 2023, Integra had to voluntarily recall the manufacturing of its key products like PriMatrix, SurgiMend, Revize and TissueMend from its Boston, MA, manufacturing facility. In the second quarter of 2023, the company reported a decline in global revenues, primarily as the result of this recall, which affected both Domestic and International sales.
Further, due to the voluntary recall, Integra recorded a $24.1 million write-off of the inventory that could no longer be sold. In June, Integra submitted an initial response to the audit findings but currently expects the matter to get resolved not before 2023-end.
Foreign Exchange Woes Persist: Outside the United States, Integra conducts U.S. dollar-denominated transactions with customers who generate revenues in currencies other than the U.S. dollar. As a result, currency fluctuations between the U.S. dollar and currencies in which customers do business may impact the demand for the company's products in foreign countries. IART’s 2022 revenues reflected a 260-basis point impact due to unfavorable FX headwinds due to the continued strength of the U.S. dollar.
Estimate Trend
The Zacks Consensus Estimate for 2023 earnings per share (EPS) has remained constant at $3.14 in the past 30 days.
The consensus estimate for the company’s 2023 revenues is pegged at $1.56 billion. This suggests a 0.12% fall from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Align Technology ALGN and Quanterix QTRX.
Haemonetics has an estimated earnings growth rate of 26.1% in fiscal 2024 compared with the industry’s 18.7%. HAE’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 19.39%. Its shares have rallied 12.5% against the industry’s 5.6% fall in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Align Technology, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 17.5% compared with the industry’s 12.8%. Shares of the company have rallied 31.2% compared with the industry’s 16.7% growth over the past year.
ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed in one quarter. In the last reported quarter, it delivered an average earnings surprise of 9.9%.
Quanterix, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 62.8% for the current year compared with the industry’s 15.2%. Shares of QTRX have surged 134.3% against the industry’s 5.6% decline over the past year.
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