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 strength of its diversified product portfolio. Despite the ongoing macro headwinds, the preference for UroLift over other outpatient BPH treatments continued to be driven by strong clinical results.
Moreover, the underlying performance in densely populated geographies like Asia buoys optimism. However, mounting expenses and a competitive space are worrisome for TFX.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 5.2% against the 9.8% growth of the industry and the 15.7% rise of the S&P 500 composite.
The global provider of med-tech products has a market capitalization of $11.20 billion. The company has an earnings yield of 5.57% against the industry’s -6.35%. Teleflex surpassed estimates in each of the trailing four quarters, delivering an average earnings surprise of 3.26%.
Let’s delve deeper.
Tailwinds
Impressive Performance Across Product Category: Teleflex had a strong start to 2023 with continued momentum across its broad business. Vascular Access delivered a solid performance across the portfolio, with the business getting back to growth post the tough COVID-19 comparisons experienced in 2022.
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Within Interventional Access, TFX benefitted from the strength of its largest product categories, including complex catheters, balloon pumps and OnControl. Among larger franchises in the Anesthesia business, the performances of hemostatic products, regional anesthesia and endotracheal tubes were noteworthy in the first quarter.
In the Surgical business, metal ligation clips and instrument revenues increased by double digits year over year. Broad-based strength across the OEM portfolio is also encouraging, with double-digit growth in all product categories.
Strong Prospects of Urolift: Within Interventional Urology, TFX witnessed growth for UroLift in the hospital setting in the first quarter. The end market for UroLift in the United States is expected to continuously improve throughout 2023.
Meanwhile, Teleflex made considerable progress in the geographic expansion of UroLift with entry into several new markets in 2022, including Japan and China. The company will spend 2023 training surgeons, building its presence in key cities and continuing to engage with the Chinese Urological Society to build acceptance.
Business in Asia Holds Long-Term Potential: From a geographic perspective, Asia continues to be an important growth driver for Teleflex. In the first quarter of 2023, the company experienced strength across the region, with all of them posting a solid performance.
China continued to be a significant contributor with very high single-digit growth in the quarter. Although the surgical procedure activity in China has not yet reached normal COVID-19 levels following the termination of the zero-COVID-19 policy in late 2022, the company noticed improvement as the quarter went on.
Downsides
Q1 Negatives: In the first quarter, Teleflex’s SG&A expenses rose 13%, while R&D expenses increased 14.1%. During the first quarter earnings update, management stated that through the first two months of the quarter, patient flow declined by another 3.7%. Foreign exchange and a competitive environment remain a concern.
Increasing Competition: Teleflex competes with companies, ranging from small start-up enterprises to larger and more established companies that have access to significantly greater financial resources. Major competitors include Medtronic and Becton, Dickinson and Company. Per TFX, it competes primarily based on clinical superiority and innovative features that enhance patient benefit, product reliability, performance, customer and sales support and cost-effectiveness.
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 $2.94 billion. This suggests a 5.24% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Zimmer Biomet ZBH, Penumbra PEN and Hologic, Inc. HOLX.
Zimmer Biomet has an earnings yield of 5.23% compared to the industry’s -3.14%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. Its shares have rallied 34.8% against the industry’s 22.2% decline over the past year.
ZBH sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Penumbra, sporting a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra shares have surged 170.3% compared with the industry’s 9.8% rise over the past year.
PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 109.4%.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.87% compared to the industry’s -6.35%. Shares of HOLX have risen 12.7% compared with the industry’s 9.8% growth over the past year.
Hologic’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.
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Hologic, Inc. (HOLX) : Free Stock Analysis Report
Teleflex Incorporated (TFX) : Free Stock Analysis Report
Zimmer Biomet Holdings, Inc. (ZBH) : Free Stock Analysis Report
Penumbra, Inc. (PEN) : Free Stock Analysis Report
