Integra LifeSciences IART is progressing well with its growth strategies like acquisitions, product launches and international expansion. However, a tough competitive landscape and erratic currency movements are likely to offset the positives.
In the past one year, the company’s shares have outperformed the industry. The stock has rallied 30% compared with the industry’s 19.6% rise.
This $5.11-billion leader of regenerative medicines expects earnings growth of 12.4% over the next five years. Also, the company has a trailing-four quarter positive earnings surprise of 7.1%, on average.
Let’s delve deeper into the factors that substantiate the company’s Zacks Rank #3 (Hold).
Codman Specialty Surgical (CSS) Segment Holds Potential: CSS revenues increased 7.3% on an organic basis during the quarter on the successful completion of the Codman transition services agreements and product portfolio expansion. Internationally, revenues increased double digits driven by product launches as well as robust performance in China and Japan.This trend is expected to drive growth for the company in the near future.
Strength in Regenerative Technologies: In the third quarter of 2019, global revenues of the company’s orthopedics business registered a 7% uptick in the United States along with 20% growth in the company’s ankle and shoulder portfolios. In wound reconstruction and care, organic revenues grew about 3% in the third quarter on strength in the company’s outpatient Wound Care and Surgical Reconstructive portfolios. Integra LifeSciences witnessed strong demand for PriMatrix, SurgiMend and amniotic products during the quarter. This impressive momentum is likely to continue in the near future.
Solid Growth in International Business: International sales within CSS have been strong in recent times driven by growth in core neurosurgery business and strength in certain key markets such Europe, Canada, China, and Japan. Integra LifeSciences is looking forward to investment opportunities in the Asian market in order to grow business much faster than the United States. In line with this, the company is preparing to launch several products in China and Japan. In the third quarter of 2019, the company launched DuraGen in Japan, where it also started witnessing solid adoption.
However, there are a few factors marring growth for the company.
Competition: Integra LifeSciences faces significant competition in the surgical implants and medical instruments market from major players like Johnson & Johnson, Medtronic, Inc., Stryker Corporation, Becton, Dickinson and Company, and C.R. Bard, Inc.
Foreign Exchange Woes: Currency fluctuations between the U.S. dollar and foreign currencies have been impacting demand for Integra LifeSciences’ products in overseas markets. With the recent upward trend observed in the value of the U.S. dollar, the company’s international revenues are likely to take a hit.
Which Way Are Estimates Treading?
For the fourth quarter of 2019, the Zacks Consensus Estimate for earnings is pegged at 67 cents, indicating 3.1% rise from the year-ago quarter’s figure. The same for revenues is pegged at $397.8 million, calling for year-over-year growth of 3.8% from the prior-year quarter’s number.
The Zacks Consensus Estimate for 2019 earnings is pegged at $2.74, suggesting 13.2% year-over-year growth from the year-ago figure. The same for revenues is pegged at $1.52 billion, suggesting 3.3% rise from the prior-year number.
Stocks Worth a Look
A few better-ranked stocks from the broader medical space are Haemonetics Corporation HAE, NuVasive, Inc NUVA and ResMed RMD. While ResMed sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics has a projected long-term earnings growth rate of 13.5%.
NuVasive has an expected long-term earnings growth rate of 10.9%.
ResMed has a long-term earnings growth rate of 12.9%.
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