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Integer Holdings (ITGR) Beats on Q2 Earnings, Ups 2021 View

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Integer Holdings Corporation ITGR delivered adjusted earnings per share (“EPS”) of $1.07 in the second quarter of 2021, skyrocketing 234.4% year over year. The figure surpassed the Zacks Consensus Estimate by 17.6%.

The adjustments include expenses related to amortization of intangibles and certain legal expenses, among others.

GAAP EPS for the quarter was 89 cents a share, reflecting a huge surge from the year-earlier EPS of a penny.

Revenues in Detail

Integer Holdings registered revenues of $312 million in the second quarter, up 29.9% year over year. The figure surpassed the Zacks Consensus Estimate by 6.7%.

Organically, revenues increased 29.5%.

Robust performances by both segments of the company drove the top line.

Segmental Analysis

Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.

Medical Sales reported revenues of $301.6 million, up 30.4% year over year on a reported basis and 29.9% on an organic basis.

Medical Sales has three product lines — Advanced Surgical, Orthopedics and Portable Medical (AS&O); Cardio & Vascular; and Cardiac & Neuromodulation.
Integer Holdings’ AS&O business has been divested to Viant. Consequently, revenues at the segment comprise net sales from acquirer Viant under supply agreements associated with the divestiture.

Integer Holdings Corporation Price, Consensus and EPS Surprise

Integer Holdings Corporation Price, Consensus and EPS Surprise
Integer Holdings Corporation Price, Consensus and EPS Surprise

Integer Holdings Corporation price-consensus-eps-surprise-chart | Integer Holdings Corporation Quote

Revenues amounted to $29.3 million, down 4.4% year over year on a reported basis and 4.5% on an organic basis. Per management, the downside was due to decline in ventilator and patient monitoring components sales compared with the pandemic-driven peak demand in 2020.

Revenues at the Cardio & Vascular business totaled $152.6 million, up 18.2% from the prior-year quarter on a reported basis and up 17.4% organically. The business recorded strong increases across all cardio & vascular markets, especially interventional cardiology, electrophysiology and peripheral vascular markets.

Revenues at the Cardiac & Neuromodulation business were $119.7 million, up 67.1% year over year, both on a reported and an organic basis. Sales in the cardiac rhythm management market increased by high double digits while sales in the neuromodulation market doubled.

Revenues at the Non-Medical Sales segment totaled $10.4 million, up 19.1% year over year, both on a reported and an organic basis. Sales at the Electrochem product line, a part of the Non-Medical segment, improved 19%, on the back of the emerging recovery of the energy market.

Margin Analysis

Integer Holdings generated gross profit of $88.7 million in the second quarter, up 53.4% year over year. Gross margin in the reported quarter expanded 434 basis points (bps) to 28.4%.

Selling, general and administrative expenses were $35.4 million, up 4.4% year over year. Research, development and engineering costs were $13.7 million in the quarter, up 7.8% year over year. Adjusted operating expenses of $49.1 million increased 5.3% year over year.

Adjusted operating profit totaled $39.6 million, reflecting a 253.4% surge from the prior-year quarter. Adjusted operating margin in the second quarter expanded a huge 803 bps to 12.7%.

Financial Position

Integer Holdings exited the second quarter of 2021 with cash and cash equivalents of $30.6 million compared with $28.4 million at the end of the first quarter. Total debt (including current portion) at the end of second-quarter 2021 was $668.7 million compared with $687.1 million at the end of the first quarter.

Cumulative net cash flow from operating activities at the end of the second quarter was $68.8 million compared with $77.9 million a year ago.

2021 Guidance

Integer Holdings, boosted by its strong performances, has raised its 2021 outlook.

For 2021, Integer Holdings expects revenues to be in the range of $1,200-$1,220 million, reflecting an improvement of 12-14% from the 2020 reported figure. This is up from the previously issued guidance of $ $1,175-$1,205 million, indicating an increase of 10-12%.

The company expects full-year adjusted EPS in the band of $3.66-$4.03, indicating an uptick of 32-46% from the 2020 reported figure (up from the previous expectation of $3.52-$3.90, which called for a 27-41% increase from the year-ago reported figure). The Zacks Consensus Estimate for the same is pegged at $3.85.

For third-quarter 2021, the company projects similarly strong year-over-year growth as well. However, management believes that sales will be slightly lower than the second quarter as customers are expected to build some inventory in the reported quarter to protect against potential global supply chain constraints.

Our Take

Integer Holdings exited the second quarter with better-than-expected results. Robust segmental performances, along with strength in majority of the product lines, are impressive. Continued business recovery, despite the U.S. labor constraints and global supply chain disruptions, is encouraging. Expansion of both margins also bodes well for the stock. A raised financial outlook raises our optimism.

Integer Holdings continued to witness weak performance across its AS&O product line in the quarter under review. The company’s expectations of lower sales in the third quarter raise our apprehension.

Zacks Rank and Key Picks

Integer Holdings currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have already announced their quarterly results are Boston Scientific Corporation BSX, West Pharmaceutical Services, Inc. WST and Laboratory Corporation of America Holdings LH or LabCorp, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Boston Scientific reported second-quarter 2021 adjusted EPS of 40 cents, which beat the Zacks Consensus Estimate by 8.1%. Second-quarter revenues of $3.08 billion outpaced the consensus mark by 4.4%.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.

LabCorp reported second-quarter 2021 adjusted EPS of $6.13, surpassing the Zacks Consensus Estimate by 8.7%. Revenues of $3.84 billion exceeded the Zacks Consensus Estimate by 6.9%.


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