Integer Holdings (ITGR) Q3 Earnings Top Estimates, FY23 View Up
Integer Holdings Corporation ITGR delivered adjusted earnings per share (EPS) of $1.27 in the third quarter of 2023, which improved 33.7% year over year. The figure topped the Zacks Consensus Estimate by 20.9%.
The adjustments include expenses related to the amortization of intangible assets and restructuring and restructuring-related charges, among others.
GAAP EPS for the quarter was 81 cents, reflecting an improvement of 68.8% year over year.
Revenues in Detail
Integer Holdings registered revenues of $404.7 million in the third quarter, up 18.1% year over year. The figure surpassed the Zacks Consensus Estimate by 8.7%.
Organically, revenues increased 17.8%.
Robust Medical sales drove the company’s top line in the reported period.
Segmental Analysis
Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.
Medical Sales reported revenues of $395.9 million, up 19.6% year over year on a reported and 19.3% on an organic basis. This figure compares to our Medical Sales third-quarter projection of $358.5 million.
Medical Sales has three product lines — Advanced Surgical, Orthopedics & Portable Medical (AS&O); Cardio & Vascular; and Cardiac Rhythm Management (CRM) & Neuromodulation.
Integer Holdings’ AS&O revenues amounted to $22.7 million, down 13.3% year over year both on a reported and organic basis. Per management, this resulted from the execution of the planned multi-year Portable Medical exit announced in 2022 and the low double-digit decline of Advanced Surgical and Orthopedics. This compares to our third-quarter projection of $29.7 million for AS&O revenues.
Revenues at the Cardio & Vascular business totaled $214 million, up 22.9% from the prior-year quarter on a reported basis and up 22.2% organically. The solid year-over-year performance was driven by continued strong demand across all markets, growth in key products such as guidewires, new product ramps in electrophysiology and structural heart, and supply-chain improvements. This compares to our third-quarter projection of $185.8 million.
Revenues at the Cardiac Rhythm Management & Neuromodulation business were $159.2 million, up 21.9% year over year both on a reported and organic basis, with double-digit growth in both CRM and Neuromodulation. The business was driven by strong demand, including double-digit growth from emerging customers with pre-market approval products and supply-chain improvements. This compares to our third-quarter projection of $143 million for the product line.
Revenues in the Non-Medical segment totaled $8.8 million, down 25.3% year over year both on a reported and organic basis. This was due to Electrochem sales returning to a normalized run rate after previously higher sales from the supply-chain recovery. This figure compares to our segmental projection of $13.6 million for the third quarter.
Integer Holdings Corporation Price, Consensus and EPS Surprise
Integer Holdings Corporation price-consensus-eps-surprise-chart | Integer Holdings Corporation Quote
Margin Analysis
Integer Holdings generated a gross profit of $105.6 million in the third quarter, up 21.7% year over year. The gross margin in the reported quarter expanded 78 basis points (bps) to 26.1%.
We had projected 25.8% of gross margin for the third quarter.
Selling, general and administrative expenses were $42.1 million, up 10.2% year over year. Research, development and engineering costs were $14.5 million in the quarter, down 9.8% year over year. Adjusted operating expenses of $56.6 million increased 4.3% year over year.
Adjusted operating profit totaled $48.9 million, reflecting a 50.9% uptick from the prior-year quarter. Adjusted operating margin in the third quarter expanded 263 bps to 12.1%.
Financial Position
Integer Holdings exited the third quarter of 2023 with cash and cash equivalents of $32.1 million compared with $38.6 million at the end of the second quarter. Total debt (including the current portion) at the end of third-quarter 2023 was $941.4 million compared with $985.4 million at the second-quarter end.
Cumulative net cash flow from operating activities at the end of third-quarter 2023 was $124.6 million compared with $64.8 million a year ago.
2023 Guidance
Integer Holdings has upped its financial outlook for 2023 on the back of continued strong customer demand across its product lines.
For 2023, the company now expects revenues in the range of $1,575 million-$1,595 million (suggesting an improvement of 14-16% from the 2022 reported figure), up from the earlier projection of $1,530 million-$1,550 million (suggesting an improvement of 11-13% from the 2022 reported figure). The Zacks Consensus Estimate is pegged at $1.54 billion.
The company now expects full-year adjusted EPS in the band of $4.47-$4.67 (suggesting a rise of 15-20% from the 2022 reported figure), up from the earlier projection of $4.23-$4.43 (suggesting a rise of 9-14% from the 2022 reported figure). The Zacks Consensus Estimate is pegged at $4.33.
Our Take
Integer Holdings exited the third quarter of 2023 with better-than-expected results. The strong year-over-year top-line and bottom-line performances were impressive. Robust performances by the Medical segment and strength in the majority of the product lines of the Medical segment were encouraging. The expansion of both margins bodes well for the stock.
Integer Holdings’ recent acquisition of certain assets of InNeuroCo, Inc. to strengthen neurovascular catheter capabilities (October 2023) also looks promising for the stock.
However, the decline in Non-Medical revenues was discouraging. Integer Holdings continuing to navigate a challenging inflationary and supply-chain environment raises 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 announced quarterly results are Abbott Laboratories ABT, Boston Scientific Corporation BSX and West Pharmaceutical Services, Inc. WST.
Abbott, carrying a Zacks Rank of 2 (Buy), reported third-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.14 billion outpaced the consensus mark by 3.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.8%.
Boston Scientific reported third-quarter 2023 adjusted EPS of 50 cents, beating the Zacks Consensus Estimate by 4.2%. Revenues of $3.53 billion surpassed the Zacks Consensus Estimate by 1.8%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 12.8%. BSX’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.3%.
West Pharmaceutical reported third-quarter 2023 adjusted EPS of $2.16, beating the Zacks Consensus Estimate by 16.1%. Revenues of $747.4 million surpassed the Zacks Consensus Estimate by 0.1%. It currently carries a Zacks Rank #2.
West Pharmaceutical has a long-term estimated growth rate of 5.9%. WST’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 17.6%.
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