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Integra LifeSciences' (IART) Earnings Top Estimates in Q3

Zacks Equity Research

Integra LifeSciences Holdings Corporation IART delivered adjusted earnings per share (EPS) of 68 cents in the third quarter of 2019, up 15.3% from a year ago. The metric surpassed the Zacks Consensus Estimate by 4.6%.

Reported loss per share during the third quarter was 32 cents against reported EPS of 15 cents in the prior-year quarter.

Revenue Discussion

Total revenues in the reported quarter inched up 3.6% year over year to $379.1 million. This figure beat the Zacks Consensus Estimate by 0.7%. Excluding revenues from the current-period acquisitions, product discontinuations and the effect of currency exchange rates, organic revenues rose 4.7% year over year.

Coming to product categories, revenues from the Codman Specialty Surgical segment rose 5.8% to $252.9 million. The upside was driven by continued positive customer reception of several new products like CereLink, CertasPlus and Integra DUO.

Integra LifeSciences Holdings Corporation Price, Consensus and EPS Surprise

 

Integra LifeSciences Holdings Corporation Price, Consensus and EPS Surprise

Integra LifeSciences Holdings Corporation price-consensus-eps-surprise-chart | Integra LifeSciences Holdings Corporation Quote

Orthopedics and Tissue Technologies revenues totaled $126.1 million in the third quarter, down 0.6% year over year owing to sales decline in the Private Label portfolio.

Margin Trend         

In the reported quarter, gross profit totaled $236.5 million. Gross margin expanded 153 basis points (bps) to 62.4% on a 6.2% rise in gross profit. Selling, general and administrative expenses contracted 0.1% to $173.1 million in the quarter under review while research and development expenses fell 6.4% to $19 million. Operating profit came in at $44.4 million, up 53.2% year over year. Overall, adjusted operating margin saw a 379-bps expansion year over year to 11.7%.

Financial Position

Integra LifeSciences exited the third quarter with cash and cash equivalents of $207.9 million, up from $176.1 million at the end of the second quarter. Year to date, net cash flow from operating activities in the third quarter was $142.2 million, down from $156.9 million a year ago.

2019 Outlook

Integra LifeSciences has tightened its revenue guidance for 2019. The company expects 2019 revenues in the range of $1.517-$1.522 billion versus the earlier range of $1.515 -$1.525 billion. Organic revenue growth projection has been reaffirmed at roughly 5%. The Zacks Consensus Estimate for 2019 revenues is pegged at $1.52 billion, near the high end of the guided range.

The company has reaffirmed its adjusted EPS guidance at the band of $2.70-2.75. The Zacks Consensus Estimate for 2019 adjusted earnings stands at $2.74, within the company’s guided range.

Our Take

Integra LifeSciences exited the third quarter on a solid note as both adjusted EPS and revenues beat consensus marks. We are upbeat about the year-over-year revenue growth in the Codman Specialty Surgical segment. Expansion of both the margins is also encouraging as well.The 2019 guidance for organic revenue growth and adjusted EPS appears strong. However, the drop in the Orthopedics and Tissue Technologies revenues is concerning.

Zacks Rank and Key Picks

Integra LifeSciences currently has a Zacks Ranks #3 (Hold).

A few better-ranked stocks in the broader medical space are Mckesson MCK, Stryker SYK and Syneos Health SYNH. While McKesson carries a Zacks Rank #1 (Strong Buy), the other two companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for McKesson’s second-quarter fiscal 2020 revenues is pegged at $54.94 billion, suggesting 3.5% growth from the prior-year reported figure. The same for adjusted EPS stands at $3.59.

The Zacks Consensus Estimate for Stryker’s third-quarter fiscal 2019 revenues is pegged at $3.58 billion, calling for a year-over-year increase of 10.5%. The same for adjusted EPS stands at $1.91, indicating an increase of 13% from the year-ago reported figure.

The Zacks Consensus Estimate for Syneos’ third-quarter fiscal 2019 revenues is pegged at $1.18 billion, suggesting 6.03% growth from the prior-year reported figure. The same for adjusted EPS stands at 72 cents, implying a 5.3% improvement from the year-ago reported number.

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