Here's Why You Should Retain Teleflex (TFX) Stock for Now
Teleflex TFX is well-poised to grow in the coming quarters, backed by the performance of its global product category. The acquisition of Palette Life Sciences will bolster the company’s Interventional Urology business unit and meaningfully contribute to its long-term durable growth.
Moreover, Teleflex is solvent enough to meet its near-term debt obligations. Meanwhile, persistent inflationary costs and a tough competitive space are worrisome for TFX.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 4.2% against the 6.4% growth of the industry and the 15.1% rise of the S&P 500 composite.
Teleflex, the global provider of medical technologies, has a market capitalization of $10.04 billion. The company has an earnings yield of 6.22% against the industry’s -7.21%. TFX surpassed estimates in each of the trailing four quarters, delivering an average earnings surprise of 4.52%.
Let’s delve deeper.
Tailwinds
Strength Across the Diversified Product Category: In Vascular Access, the initial launch activities for the next-generation Arrow VPS Rhythm DLX navigation device and the new Arrow PICC pre-loaded with the NaviCurve Stylet have generated a positive customer response. Interventional Access saw strength across its largest product categories, including complex catheters, balloon pumps and OnControl.
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In the Surgical business, Teleflex continued to advance in the integration of Standard Bariatrics. Within the Original Equipment and Development Services segment, the double-digit growth in all product categories, including microcatheters, is reflective of the broad-based strength of the portfolio.
New Acquisition to Contribute: In July, Teleflex announced a definitive agreement to acquire the privately held medical device company, Palette Life Sciences. The acquisition will expand TFX’s Interventional Urology portfolio, which includes the UroLift System, to include Non-Animal Stabilized Hyaluronic Acid spacer and tissue bulking products that improve patient outcomes in urology and urogynecology disorders, colorectal conditions and radiation oncology procedures.
With urology being a growing market segment showing positive trends, the acquisition is likely to advance Teleflex’s strategic vision and play a role in providing differentiated technology to urologists and related specialties.
Favorable Solvency: At the end of the second quarter of 2023, Teleflex reported cash and cash equivalents of $250.82 million, while the current portion of the debt remained significantly lower at $88 million. This shows that the company has sufficient cash for debt repayment despite the economic slowdown. In addition, TFX’s debt-to-capital ratio totaled 27% compared with the industry’s 31.5% as of Jun 30, 2023.
Downsides
Rising Expenses – a Concern: In the second quarter, the company’s adjusted gross margin was affected by continued cost inflation, product recalls and an unfavorable impact on productivity due to raw material supply. SG&A expenses rose 3%, while R&D expenses increased 6.8% compared to the last year.
A Tough Competitive Landscape: Teleflex competes with companies, ranging from small startup enterprises to larger and more established companies that have access to significantly greater financial resources. Furthermore, extensive product research and development and rapid technological advances characterize the market in which we compete.
Per management, the company competes primarily based on clinical superiority and innovative features that enhance patient benefits, product reliability, performance, customer and sales support and cost-effectiveness. Its major competitors include Medtronic and Becton, and Dickinson and Company.
Estimate Trend
The Zacks Consensus Estimate for TFX’s 2023 earnings per share (EPS) has remained constant at $13.29 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $2.96 billion. This suggests a 6.07% rise 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 4.23% against the industry’s -1.33%. Haemonetics’ earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 19.39%. Its shares have risen 22.3% compared to the industry’s 0.6% decline 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 16.5%. Shares of the company have rallied 37.7% compared with the industry’s 6.4% 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 15.2%. Shares of QTRX have risen 206.8% compared to the industry’s 0.6% decline 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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Haemonetics Corporation (HAE) : Free Stock Analysis Report
Teleflex Incorporated (TFX) : Free Stock Analysis Report
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