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Here's Why Investors Should Retain Integra (IART) Stock for Now

Integra LifeSciences Holdings Corporation IART has been gaining from strength across its business segments. The company recorded better-than-expected results in the first quarter of 2022. Robust demand for its products is encouraging. Further, the company’s continued efforts to achieve the long-term growth expectations for ACell instills optimism. However, rising costs and foreign exchange headwinds raise apprehension.

In the past year, the Zacks Rank #3 (Hold) stock has declined 8.4% compared with the 13.8% fall of the industry. This compares with a 2.4% drop of the S&P 500.

The renowned medical device company has a market capitalization of $5.21 billion. Its first-quarter adjusted earnings per share surpassed the Zacks Consensus Estimate by 8.8%.

In the past five years, the company registered earnings growth of 12.6%, ahead of the industry’s 8.5% rise and the S&P 500’s 13.4% increase. The company’s long-term projected growth of 9.6% compared with the industry’s growth projection of 15.2% and the S&P 500’s projected 10.7% growth.

Zacks Investment Research
Zacks Investment Research


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Let’s delve deeper.

Factors At Play

Q1 Upsides: Integra exited the first quarter on a bullish note, with earnings and revenues beating the Zacks Consensus Estimate. The year-over-year growth across both the Codman Specialty Surgical (CSS) and Tissue Technology segments buoys optimism. Robust sales from CereLink ICP Monitor System and SurgiMend seem promising. The adjusted earnings per share of 74 cents in the quarter under review exceeded the high-end of the company’s guidance, instilling investors’ confidence.

Strong Focus on Portfolio Optimization: Integra reshaped its portfolio with a strategic divestiture related to the ACell acquisition. With an expanded commercial team, new marketing and digital customer outreach programs and a more focused compensation plan, Integra anticipates revenue growth for ACell in the second half of 2022. The controlled market release of the Aurora Surgiscope for use in minimally invasive neurosurgery continued to progress as planned. Meanwhile, the MIRA Registry for the surgical treatment of intracerebral hemorrhage is also getting executed successfully.

Within the Tissue Technologies arm, the company’s NeuraGen 3D products targeted for mid-gap peripheral nerve repair are expected to boost sales momentum.

International Business Grows: Integra witnessed certain key developments overseas, despite facing foreign exchange fluctuations across its international business. In the first quarter, within CSS, international sales increased mid-single digits, led by a strong performance of CereLink in Europe and growth in Asia. Performance in China and Japan was strong, with low double-digit growth in both the countries.

On a global basis, Integra accelerated investments in digital capabilities that will enable the commercial teams to reach a broader customer base. Also, the company has added specialists in neuromonitoring, hydrocephalus and seven regenerative areas.

Downsides

Escalating Expenses: In the first quarter, Integra’s selling, general and administrative expenses rose 2.1%, while research and development expenses increased 7.6%. These mounting operating expenses are weighing on the company’s bottom line.

Tough Competition: Integra faces significant competition in the surgical implants and medical instruments market. The company needs to be innovative on the product front to keep up with the competition. Moreover, consolidation trends in the industry could lead to intense pricing pressure and further competition in this niche.

Forex Woes: Integra generates significant revenues outside the United States. Unfavorable currency fluctuations between the U.S. dollar and other currencies in which customers do business may significantly impact the demand for the company's products.

Estimate Trend

Integra has been witnessing a positive estimate revision trend for 2022. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 0.3% to $3.31.

The Zacks Consensus Estimate for 2022 revenues is pegged at $1.59 billion, suggesting a 3.26% surge from the 2021 reported number.

Other Key Picks

A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Medpace Holdings, Inc. MEDP and Masimo Corporation MASI.

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 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has outperformed its industry in the past year. AMN has gained 4.4% against the industry’s 64.1% 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 15% compared with the industry’s 64.1% fall.

Masimo has a historical growth rate of 15.1%. Masimo’s earnings beat estimates in each of the trailing four quarters, the average surprise being 4.4%. The company currently carries a Zacks Rank #2.

Masimo has underperformed the industry in the past year. MASI has declined 34.1% compared with a 13.9% fall of the industry.


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