A month has gone by since the last earnings report for Integer (ITGR). Shares have added about 2.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Integer due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Integer Holdings Q2 Earnings Miss Estimates, Down Y/Y
Integer Holdings Corporation reported second-quarter 2020 adjusted earnings per share of 32 cents, which missed the Zacks Consensus Estimate of 40 cents by 20%. The bottom line also plunged 73.9% on a year-over-year basis.
Revenues declined 23.6% year over year to $240.1 million on a reported basis. However, the top line beat the Zacks Consensus Estimate by 1.9%.
Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.
At the segment, reported revenues were $231.4 million, down 22.2% year over year. Revenues declined 22.8% from the prior-year quarter on an organic basis.
Medical Sales has three sub-segments — Advanced Surgical, Orthopedics and Portable Medical (AS&O); Cardio & 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 comprise net sales from acquirer Viant under supply agreements associated with the divestiture.
Revenues amounted to $30.6 million, down 6.2% year over year and 6.1% on an organic basis. Per management, the downside can be attributed to the impact of the COVID-19 pandemic and a blend of customers’ responses. However, higher demand for ventilator and patient monitoring components partially offset the downside.
Cardio & Vascular
Revenues at the segment totaled $129.1 million, down 14.2% from the prior-year quarter and 15.2% organically. Per management, this was owing to the impact of the pandemic and their customers’ responses throughout nearly all Cardio & Vascular markets.
Cardiac & Neuromodulation
Revenues at this segment totaled $71.7 million, declining 37.4% on both year-over-year and organic basis. This was due to Nuvectra bankruptcy ($7 million) and decline in CRM and Neuromodulation (keeping with the market impact and a blend of customers’ responses).
Reported revenues at the segment totaled $8.7 million, down 47.6% on both year-over-year and organic basis.
Integer Holdings generated a gross profit of $57.9 million in the second quarter, down 40.3% year over year. As a percentage of revenues, gross margin in quarter contracted 680 basis points (bps) to 24.1%.
Selling, general and administrative expenses (SG&A) were $33.9 million, up 2.3% year over year.
Research, development and engineering costs were $12.7 million in the quarter, up 11.8% year over year.
Total operating income amounted to $9.2 million, which plunged 81.4% year over year.
Operating margin in the quarter under review was 3.8%, down 1190 bps year over year.
The company has refrained from providing full-year 2020 guidance on account of the continued uncertainty surrounding the impact and recovery period of the COVID-19 pandemic.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -39.62% due to these changes.
Currently, Integer has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Integer has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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