Here's Why You Should Retain Teleflex (TFX) Stock for Now
Teleflex Incorporated TFX has been gaining from strength in its Vascular and Interventional Access product portfolios. The growing preference for the company’s UroLift system buoys optimism. A strong solvency position is an added plus. However, foreign exchange headwinds and tough competition raise apprehension.
Over the past year, this Zacks Rank #3 (Hold) stock has declined 18.6% compared with 1.6% growth of the industry and 13.1% rise of the S&P 500 composite.
The renowned global medical device company has a market capitalization of $16.16 billion. Its last-reported fourth-quarter 2021 earnings surpassed the Zacks Consensus Estimate by 1.9%.
Over the past five years, the company registered earnings growth of 12.5%, way ahead of the industry’s 8.8% rise and the S&P 500’s 2.8% increase. The company’s long-term earnings growth rate of 13% compares to the industry’s growth projection of 15.1% and the S&P 500’s estimated 11.4% long-term rise.
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Let’s delve deeper.
Key Drivers
Vascular Business Grows: We are encouraged by the robust performances of Teleflex’s Vascular and Interventional Access product portfolios. Within Vascular Access, revenues increased 5.8% year over year and 6.4% at CER in the fourth quarter. Per management, the company’s market leadership in central venous catheters and midlines as well as its unique coated Peripherally Inserted Central Catheters (PICC) portfolio continues to position the company for dependable growth.
Meanwhile, the Interventional business registered net revenues growth of 7.7% reportedly and 8.2% at CER, as the company witnessed increased demand for complex catheters and balloon pumps. Teleflex also continued to invest in the interventional portfolio, including complex catheters and its large-bore closure device, MANTA.
Urolift Gains Traction: During the fourth quarter, the preference for UroLift over other outpatient benign prostatic hyperplasia (BPH) treatments continued to be driven by strong clinical results. The company expects to begin the rollout of UroLift in Japan after implementing its reimbursement in April 2022, with further launches expected in France, Italy and Spain during the second half of 2022.
On its earnings call for the reported quarter, Teleflex noted its plans to advance the rollout of UroLift 2, with the conversion of the vast majority of the U.S. users anticipated by the end of 2022.
Strong Solvency: Teleflex exited 2021 with cash and cash equivalents of $445.1 million. Meanwhile, total debt came at $1.74 billion, much higher than the quarter-end cash and cash equivalent level. However, the company’s debt payable in the near term stands at $110 million, which is lower than the current cash holding. This shows that the company has sufficient cash for debt repayment despite the pandemic.
Downsides
Coronavirus Impact: Teleflex’s revenue growth in the fourth quarter was offset by the impact of COVID-19 and the divestiture of the respiratory assets to Medline. The Americas and EMEA region continued to face COVID-19 headwinds. Further, the ongoing COVID-19 headwinds kept hampering UroLift procedures.
Competitive Landscape: Teleflex competes with companies ranging from small start-up enterprises to larger and more established companies with access to significantly greater financial resources. Per the company, it competes primarily on the basis of clinical superiority and innovative features that enhance patient benefit, product reliability, performance, customer and sales support and cost-effectiveness.
Forex Woes: Foreign exchange is a major headwind for Teleflex due to a considerable percentage of its revenues coming from outside the United States. The strengthening of the euro and some other developed market currencies has constantly been hampering the company’s performance in the international markets.
Estimate Trend
Over the past 60 days, the Zacks Consensus Estimate for Teleflex’s 2022 earnings has moved 0.9% down to $14.00.
The Zacks Consensus Estimate for its 2022 revenues is pegged at $2.90 billion, suggesting a 3.18% rise from the 2021 reported number.
Key Picks
A few better-ranked stocks in the broader medical space are Owens & Minor, Inc. OMI, NextGen Healthcare, Inc. NXGN and McKesson Corporation MCK.
Owens & Minor has a long-term earnings growth rate of 8.8%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 29.5%, 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.
Owens & Minor has outperformed the industry over the past year. OMI has gained 12.3% against a 16% industry decline in the said period.
NextGen has an estimated long-term growth rate of 5%. NextGen’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.5%. It currently carries a Zacks Rank #2 (Buy).
NextGen has outperformed the industry over the past year. NXGN has gained 13.9% compared with the industry’s 37% rise over the past year.
McKesson has a long-term earnings growth rate of 11.8%. McKesson’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 20.6%, on average. It presently carries a Zacks Rank #2.
McKesson has outperformed the industry over the past year. MCK has gained 59.7% in the said period compared with 8.3% growth of the industry.
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