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Integer Holdings Offloads AS&O, Focuses on Cardiac Units

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Integer Holdings Corporation ITGR recently completed the sale of its core Advanced Surgical and Orthopedics (“AS&O”) segment to MedPlast, LLC for $600 million. Following the announcement, the company’s share price rose 2.7% to close at $65.80.

Notably in the past six months, shares of Integer Holdings have rallied 46.8% against the industry’s decline of 7.6%.

The stock currently carries a Zacks Rank #2 (Buy).

Rationale Behind the Deal

The divestiture will help Integer Holdings reduce debt by approximately $500 million. With the paying down of debt, management expects Integer Holdings to be a $1.2 billion worth company.

The company is therefore expected to see higher margins, increased net earnings and greater returns on invested capital.

Furthermore, the increased financial flexibility will enable Integer Holdings to focus on its Cardio & Vascular and Cardiac & Neuromodulation product lines.

Focus on Cardiac Business

Integer Holdings’ cardiac business, comprising Cardio & Vascular and Cardiac/Neuromodulation units, has been a significant growth driver.

Notably, in the last reported quarter, the Cardio & Vascular product line saw strong year-over-year sales growth of 15.8% on robust demand for products and contract manufacturing components.

The Cardiac & Neuromodulation product line witnessed growth of 4.9% and remains a key driver of long-term growth.

Per management, the company is investing resources in these product lines to ensure innovation.

Market Prospects

Integer Holdings will be exposed to a highly profitable cardiovascular market space.

Per Research and Markets, the global market for cardiovascular devices market is expected to reach $59.1 billion by 2022 at a CAGR of 6.9%.

Other Key Picks

A few other top-ranked stocks in the broader medical space are Genomic Health GHDX, Stryker Corporation SYK and Masimo Corporation MASI.

Genomic Health has an expected earnings growth rate of 187.5%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stryker has a projected long-term earnings growth rate of 9.7%. The stock carries a Zacks Rank #2.

Masimo has an expected long-term earnings growth rate of 14.6%. The stock carries a Zacks Rank #2.

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