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Integer Holdings (ITGR) Q1 Earnings & Revenues Top Estimates

Zacks Equity Research

Integer Holdings Corporation ITGR reported first-quarter 2019 adjusted earnings of $1.00 per share, which surpassed the Zacks Consensus Estimate of 80 cents by 25%. The bottom line also surged 58.7% on a year-over-year basis.
 

Revenues increased 7.6% year over year to $314.7 million on a reported basis and outpaced the Zacks Consensus Estimate by 3.5%.
 

Segmental Analysis
 

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

Medical Sales
 

At the segment, reported revenues were $301.1 million, up 7.6% year over year. Revenues increased 8.2% on an organic basis.
 

Medical Sales has three sub-segments — Advanced Surgical, Orthopedics and Portable Medical (AS&O); Cardio and Vascular; and Cardiac/Neuromodulation.
 

Advanced Surgical, Orthopedics and Portable Medical
 

Integer Holdings’ Advanced Surgical, Orthopedics & Portable Medical segment has been divested to Viant. Consequently, revenues at the segment include net sales from the acquirer Viant under supply agreements associated with the divestiture.
 

Revenues amounted to $31.6 million, down 6.9% from the prior-year quarter. Further, the metric deteriorated 4.9% on an organic basis. Per management, the downside was owing to weaker performance by Portable Medical. However, solid demand in orthopedic markets partially mitigated the downside.
 

Cardio and Vascular
 

Revenues at the segment totaled $152.6 million, up 11.5% from the prior-year quarter and 12.1% organically. Per management, revenues increased primarily customer share gains and new product launches. Continued strong demand in the electrophysiology and peripheral vascular, and sustained demand for catheter components market fueled growth.
 

Cardiac/Neuromodulation
 

Revenues at this segment totaled $116.9 million, up 7.3% from the prior-year quarter. On an organic basis, revenues at the segment increased 7.3% year over year. Spinal cord stimulation and rising robust revenues from early-stage neuromodulation companies mainly contributed to the upside.
 

Non-Medical Sales
 

Reported revenues at the segment totaled $13.6 million, up 7% on both year over year and organic basis.

Integer Holdings Corporation Price, Consensus and EPS Surprise

 

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

Margin Analysis

Integer Holdings generated a gross profit of $88.6 million in the first quarter, up 6.1% year over year. As a percentage of revenues, gross margin in quarter contracted 40 bps to 28.2%.
 

Selling, general and administrative expenses (SG&A) were $34.9 million, down 4% year over year.
 

Research, development and engineering costs grossed $11.6 million in the quarter, down 12.7% year over year.
 

Total operating income amounted to $39.2 million, up 30.4% year over year. Adjusted income from operations totaled $25.1 million, surging 36.2% year over year.
 

Operating margin in the quarter under review was 12.4%, up 210 bps year over year.
 

Guidance Revised
 

For 2019, adjusted earnings are expected in the range of $4.15-$4.35 (up from the previously guided range of $4.05-$4.25 per share), indicating an improvement of 9-14% from the previous year. The mid-point of the latest guidance range of $4.25 is higher than the Zacks Consensus Estimate of $4.21.
 

On a reported basis, Integer Holdings expects 2019 earnings to range between $2.87 and $3.07 (up from the prior band of $2.77-$2.97 per share), suggesting a whopping growth of 99-113% year over year.
 

For 2019, Integer Holdings expects reported revenues between $1.26 billion and $1.28 billion, reflecting year-over-year growth of 4-5%. On an adjusted basis, the company expects revenues in the same band, suggesting an improvement of 4-6% from the previous year. Notably, the mid-point of the guidance is in line with the Zacks Consensus Estimate of $1.27 billion.
 

Adjusted income from operations is anticipated between $137 million and $144 million (up from the previously guided range of $134-$141 million), indicating year-over-year rise of 10-16%.
 

Summing Up
 

Integer Holdings exited the first quarter on a solid note, beating the Zacks Consensus Estimate on both the counts.
 

The company continues to gain from its Cardio & Vascular product line. Strong demand across key areas like electrophysiology, structural heart and peripheral vascular is an added positive. Management is optimistic about the divestiture of its AS&O product line. An upbeat outlook for 2019 and expansion in operating margin buoy optimism on the stock. Integer Holdings also paid  portion of its debt in the quarter under review.
 

Meanwhile, Integer Holdings’ Advanced Surgical, Orthopedics and Portable Medical put a dismal performance in the quarter under review. Gross margin contraction added to woes.
 

Zacks Rank
 

Currently, Integer Holdings carries a Zacks Rank #2 (Buy).
 

Earnings of MedTech Majors at a Glance
 

Some better-ranked stocks which reported solid results this earning season are Stryker Corporation SYK, Abbott Laboratories ABT and CONMED Corporation CNMD, each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered first-quarter 2019 adjusted earnings per share of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion were in line with the Zacks Consensus Estimate.

 

Abbott reported first-quarter 2019 adjusted earnings of 63 cents per share, beating the Zacks Consensus Estimate by 3.3%. First-quarter worldwide sales came in at $7.54 billion, above the Zacks Consensus Estimate of $7.47 billion.
 

CONMED posted first-quarter 2019 adjusted earnings per share of 57 cents, which beat the Zacks Consensus Estimate of 54 cents. Revenues were $218.4 million, surpassing the Zacks Consensus Estimate of $213 million.

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