Integra LifeSciences Holdings Corporation IART has been gaining from continued sales growth across the Codman Specialty Surgical (CSS) and Tissue Technology segments. The company posted better-than-expected results in the second quarter of 2022. Robust demand for its products is encouraging. Integra’s continued focus on product innovation instills optimism. However, macroeconomic challenges and stiff competition raise apprehension.
In the past year, the Zacks Rank #3 (Hold) stock has declined 31.6% against the 31.2% fall of the industry. This compares with a 13.2% drop of the S&P 500.
The renowned medical device company has a market capitalization of $3.98 billion. Its second-quarter adjusted earnings per share surpassed the Zacks Consensus Estimate by 2.5%.
In the past five years, the company registered earnings growth of 12.6%, ahead of the industry’s 10.3% rise and the S&P 500’s 13.4% increase. The company’s long-term projected growth of 9.7% compares with the industry’s growth projection of 15.1% and the S&P 500’s projected 11.5% growth.
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Let’s delve deeper.
Factors At Play
Impressive Q2 Results: Integra exited the second quarter of 2022 on a bullish note with better-than-expected earnings and revenues. The year-over-year growth in both the CSS and Tissue Technology segments buoys optimism. Sales from CereLink ICP Monitor System and SurgiMend raise investors’ confidence. The robust uptake of the company’s products is encouraging too. Expansion of both margins adds to the upsides.
Strong Prospects in CSS: The CSS segment benefits from growing market acceptance of the company’s global neurosurgery line-ups, including CSS management and neuromonitoring. Within CSS management, Integra is experiencing growth banking on strong market adoption of programmable valves and advanced energy (CUSA Capital and related disposables). Neuromonitoring sales are also gaining traction on new product launches. Further, the international business within CSS is witnessing a sales rebound, led by the strong performance of CereLink in Europe and growth in Asia.
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. In the Tissue Technologies business, the company’s NeuraGen 3D products targeted for mid-gap peripheral nerve repair are expected to boost sales momentum.
In the second quarter of 2022, Integra launched two new products: the Aurora Evacuator with Coagulation capability in the United States; and the Neutus EVD system in China.
Macroeconomic Headwinds: The challenging macroeconomic scenario and the lingering impact of COVID-19 in certain markets where Integra competes, specifically the Asia Pacific, are driving higher-than-anticipated inflation in terms of raw materials. These could also result in broader economic impacts and security concerns, affecting the company’s business through the second half of 2022.
Forex Woes: Integra generates significant revenues outside the United States, making it highly vulnerable to unfavorable currency fluctuations. The company expects revenues to reflect approximately 225 basis-points foreign exchange headwinds for full-year 2022.
Tough Competition: Integra faces significant competition in the surgical implants and medical instruments market. The company needs to be innovative on the product front in order to keep up with the competition. The company is also faced with intense completion from several smaller specialized companies and larger companies that do not focus on specialty surgical solutions.
The Zacks Consensus Estimate for Integra’s 2022 earnings is pegged at $3.19, indicating a 0.3% increase from the 2021 figure.
The Zacks Consensus Estimate for 2022 revenues is pegged at $1.56 billion, suggesting a 1.1% surge from the 2021 reported number.
Other Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, ShockWave Medical, Inc. SWAV and McKesson Corporation MCK.
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, 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 lost 5.4% against the industry’s 36.4% fall.
ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 25.1% against the industry’s 31.2% fall in the past year.
McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2 (Buy).
McKesson has outperformed its industry in the past year. MCK has gained 64.2% against the industry’s 15.8% fall.
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