Here's Why You Should Retain Integra (IART) Stock for Now
Integra LifeSciences Holdings Corporation IART is well-poised for growth in the coming quarters, backed by the performance of its Codman Specialty Surgical (“CSS”). The segment is benefiting from the growing market acceptance of the company’s global neurosurgery lineups, including CSS management and neuromonitoring.
The Tissue Technologies business is continuously gaining traction on efficient growth strategies and a better price management policy. It has sufficient liquidity to meet its short-term debt obligations.
However, the product recall from the Boston facility and soaring SG&A expenses are discouraging for Integra.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 8.8% against the industry’s 5.7% rise and the 13.8% increase of the S&P 500 composite.
The renowned medical device company has a market capitalization of $3.15 billion. Integra has an earnings yield of 8.58% against the industry’s yield of -6.96%. The company’s earnings surpassed estimates in three of the trailing four quarters and matched on one occasion, delivering an average surprise of 5.76%.
Let’s delve deeper.
Tailwinds
Solid Prospects of CSS: Within CSS management, Integra is experiencing growth, banking on 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). IART has expanded the international reach of the CUSA and DuraGen portfolios and bolstered the clinical evidence for its Bactiseal catheters in the European market.
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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. Overall, the CSS arm is expected to witness a revenue CAGR of 3.2% from 2021 through 2025.
Decent Sales Within Tissue Technologies: The wound reconstruction subcategory within Tissue Technologies is rebounding fast, banking on robust sales in Integra Skin and SurgiMend. The ACell franchise is driving better results too.
In the Tissue Technologies division, the company launched NeuraGen 3D, a unique mid-cap nerve repair product. Despite the product recall and subsequent manufacturing pause in Boston in the second quarter of 2023, the company is showing strength in Tissue Technologies, banking particularly on key product lines like MicroMatrix, Cytal and MediHoney.
Stable Liquidity Position: With the total debt (including the current portion) of $1.43 billion as of Jun 30, 2023, Integra looks comfortable from the liquidity point of view. The company’s cash and cash equivalents were $309 million at the end of the second quarter of 2023. Although the second quarter’s total debt was much higher than the corresponding cash and cash equivalent level, IART has $96 million of short-term payable debt on its balance sheet.
Downsides
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. The recall affected both domestic and international sales in the second quarter of 2023.
Further, the company recorded a $24.1 million write-off of the inventory, which 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.
Rising SG&A Expenses May Strain Margins: Higher freight costs, ongoing labor inflation, and manufacturing and supply-chain inefficiencies continued to put significant pressure on Integra’s margins in recent times. Integra’s SG&A expenses rose 2.6% in the second quarter of 2023. In the quarter, the unfavorable product and geographic mix, as well as Boston-recall-issue-related expenses, laid pressure on the company’s margins.
Estimate Trend
The Zacks Consensus Estimate for 2023 earnings per share (EPS) has remained constant at $3.14 in the past 30 days and has moved down from $3.53 to $3.49 in the past seven days.
The consensus estimate for the company’s 2023 revenues is pegged at $1.56 billion. This suggests a 0.1% fall from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, SiBone SIBN and Quanterix QTRX.
Haemonetics has an earnings yield of 4.29% against the industry’s -2%. Haemonetics’ earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 19.39%. Its shares have risen 20.5% compared with the industry’s 0.6% growth in the past year.
HAE sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
SiBone, carrying a Zacks Rank #2 (Buy) at present, has a long-term estimated earnings growth rate of 22.9% compared with the industry’s 16.2%. Shares of the company have rallied 38% compared with the industry’s 5.8% rise over the past year.
SIBN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.37%.
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 16.3%. Shares of QTRX have risen 182.2% compared with the industry’s 0.6% rise over the past year.
Quanterix’s earnings surpassed estimates in each of the trailing four quarters, delivering an average earnings surprise of 30.39%. In the last reported quarter, it posted an earnings surprise of 55.56%.
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Integra LifeSciences Holdings Corporation (IART) : Free Stock Analysis Report
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