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Shares of Integra LifeSciences Holdings Corporation IART reached a new 52-week high of $73.58 on Apr 19, before closing the session marginally lower at $72.82. The stock has rallied 5.8% since its fourth-quarter 2020 earnings announcement on Feb 18.
The company is witnessing an upward trend in its stock price, prompted by its solid performance in the fourth quarter despite the pandemic-led business disruptions. The company’s robust international business and strong focus on portfolio optimization boosted market sentiments. However, a stiff competitive landscape and pandemic-led lower demand for surgical procedures are concerning for the company.
Let's delve deeper.
Encouraging Q4 Performance
Integra’s impressive performance in the fourth quarter buoys optimism. The ongoing recovery within the company’s business also looks encouraging. The sequential improvement in segmental revenues in the fourth quarter was impressive. Robust demand for the company’s products was also a positive. The company provided financial guidance for fiscal 2021, calling for growth in revenues and earnings.
Other Growth Drivers
Strong Focus on Portfolio Optimization: Investors are upbeat about Integra reshaping its portfolio with a strategic divestiture during its process to acquire ACell. In January, the company announced divestment of its Extremity Orthopedics business to focus more on its profitable business. With this divestiture, Integra claims itself to be in an even stronger position to capitalize on its core products and technologies in neurosurgery and regenerative medicine as well as provide greater value to customers and shareholders. Notably, Integra is likely to strengthen its balance sheet and increase financial agility with the portfolio optimization.
Impressive International Performance: Integra, during the fourth quarter, witnessed growth in several European countries, with significant revenue uptick in China and Japan as well. Japan has achieved six consecutive quarters of double-digit revenue growth despite the impact of COVID-19. This growth has been driven by its leading neurosurgery portfolio. In 2021, Integra will be launching a number of products, including programmable valves that are specific to the Japan market. This will drive further penetration into the neurosurgery market of Japan.
Integra is also expanding its commercial presence in China. The company entered into its first exclusive licensing and distribution deal with a local Chinese partner, which will result in the launch of new complementary products in 2021.
Competitive Landscape: Integra’s operation in a highly competitive industry, which includes biggies such as Medtronic plc MDT, may induce headwinds. The company needs to be innovative on the product front in order to keep up with the competition. Moreover, consolidation trends in the industry could lead to intense pricing pressure and further competition in this niche.
Pandemic-Led Deferral of Surgical Procedures: Integra’s sales have been hit hard since the beginning of the pandemic. Further, as the pandemic took a graver form, demand for the company’s surgical procedures declined significantly, primarily due to reallocation of resources to address the surging demand caused by the COVID-19 outbreak. There was significant fall in the company’s revenues for the year 2020, resulting from COVID-19-related surgical procedure deferrals and capital spending delays at hospitals.
Zacks Rank & Other Key Picks
Currently, Integra carries a Zacks Rank #2 (Buy).
Some better-ranked stocks from the broader medical space are Align Technology, Inc. ALGN and Cantel Medical Corp. CMD.
Align Technology’s long-term earnings growth rate is estimated at 20.8%. The company presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cantel’s long-term earnings growth rate is estimated at 19%. It currently carries a Zacks Rank #2.
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Medtronic PLC (MDT) : Free Stock Analysis Report
Integra LifeSciences Holdings Corporation (IART) : Free Stock Analysis Report
Align Technology, Inc. (ALGN) : Free Stock Analysis Report
Cantel Medical Corp. (CMD) : Free Stock Analysis Report
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