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Integer Holdings Gets Positive Outlook & B+ Rating From S&P

Zacks Equity Research

Integer Holdings Corporation ITGR recently announced that Standard & Poor (S&P) revised its outlook from “stable” to “positive”. The new outlook is based on Integer’s debt reduction and expected targeted debt-to-adjusted EBITDA leverage ratio of 2.5X–3.5X.

Investors should also notice that S&P raised its issuer credit rating from B to B+, and Moody’s Investors Service upgrades its corporate family rating from B3 to B2.

In a year’s time, Integer has gained 36.8%, significantly higher than the S&P 500 index's increase of 10%. The current return is also higher than the broader industry’s 17.2% rally over the same time period.

Details of the S&P’s Outlook

An obligator rated B+ by the S&P means that the company has a strong capacity to meet its financial commitments. However, adverse business, financial, or economic conditions might impair the company’s capacity or willingness to meet its financial commitments.

The best rating is 'AAA', which means it is highly likely that the borrower will repay its debt. The worst rating is 'D,' which means the issuer has already defaulted.

Positive outlook for the company indicates that the current rating may be raised.

Reasons Behind the Outlook

Integer has strengthened its balance sheet by reducing its leverage ratio from 5.6X at the end of 2017 to 3.5X at 2018 end.

In the third quarter of 2018, Integer paid down its debt balance by $548 million from the sale of its Advanced Surgical & Orthopedic product line. Integer expects to generate continued strong free cash flow and pay down its outstanding debt by an additional $105-$115 million in 2019.

Solid Guidance

For 2019, adjusted earnings are expected to be $4.05-$4.25 per share, indicating a 7-12% rise from the previous year. Integer expects earnings per share in the $2.77-$2.97 band on a reported basis, mirroring 7-12% growth on a year-over-year basis.

Integer anticipates 2019 revenues between $1.26 billion and $1.28 billion, mirroring 4-5% growth year over year. On an adjusted basis, the company expects revenues in the same band, reflecting a 4-6% improvement from the previous year. Adjusted income from operations is anticipated between $141 million and $275 million, showing a year-over-year rise of 8-13%.

Zacks Rank & Other Stocks to Consider

Integer carries a Zacks Rank #2 (Buy). Other top-ranked stocks from the MedTech space are DexCom, Inc. DXCM, Varian Medical Systems, Inc. VAR and Masimo Corporation MASI, each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DexCom delivered a positive earnings surprise in each of the trailing four quarters, the average being 132.3%.

Varian Medical has a long-term earnings growth rate of 8%.

Masimo Corporation has a long-term earnings growth rate of 15.6%.

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