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Integra LifeSciences (IART) Q1 Earnings Beat, Margins Rise

Zacks Equity Research

Integra LifeSciences Holdings Corporation IART delivered adjusted earnings per share (EPS) of 65 cents in the first quarter of 2019, up 12.1% from the year-ago figure. The same also surpassed the Zacks Consensus Estimate by 6.6%.

Revenue Discussion

Total revenues in the reported quarter inched up 0.7% year over year to $359.7 million but lagged the Zacks Consensus Estimate by 0.6%. Excluding revenues from the current-period acquisitions, product discontinuations and the effect of currency exchange rates, organic revenues rose 3.1% year over year, in line with the earlier-provided guidance for 2019. The company also stated that it remains on track to achieve its full-year financial targets.

Coming to product categories, revenues from the company's Codman Specialty Surgical segment dipped 0.7% to $234.6 million. The quarter’s performance was majorly affected by the company’s exit from the transition services agreements covering Western Europe. Integra LifeSciences is currently into integration activities in the ERP (Enterprise Resource Planning) conversion.

Integra LifeSciences Holdings Corporation Price, Consensus and EPS Surprise

Integra LifeSciences Holdings Corporation Price, Consensus and EPS Surprise | Integra LifeSciences Holdings Corporation Quote

Orthopedics and Tissue Technologies revenues totaled $125.1 million in the first quarter, up 3.4% year over year. The upside was fueled by an improved sales force effectiveness, product introductions and double-digit growth in both ankle and shoulder product lines.

Margin Trend

Gross margin expanded 455 basis points (bps) to 64.2% in the reported quarter to $230.8 million on an 8.4% rise in gross profit. Selling, general and administrative expenses rose 6.9% to $174.9 million in the quarter under review while research and development expenses slipped a nominal 0.2% to $18.3 million. Overall, adjusted operating margin saw a 178-bp expansion to 10.4% in the quarter.

Financial Position

Integra LifeSciences exited the first quarter with cash and cash equivalents of $157 million, up from $138 million at the end of 2018. Net cash flow from operating activities in the first quarter was $187.6 million, up from $127.2 million a year ago.

2019 Outlook

Integra LifeSciences has reaffirmed its earnings and revenue guidance for 2019. The company still expects 2019 revenues in the range of $1.515-$1.525 billion, indicating 3.5% growth at the midpoint. Organic revenue growth is expected 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 reiterated its adjusted earnings per share in the band of $2.65-$2.72. The Zacks Consensus Estimate for 2019 adjusted earnings stands at $2.68, within but near the lower end of the company’s guided range.

Our Take

Integra LifeSciences exited the first quarter of 2019 on a mixed note with better-than-expected earnings and a revenue miss. However, organic revenue growth was encouraging and was in line with the company’s expectation. Within global neurosurgery business, sales in dural access and repair increased in mid-single digits on an organic basis with growth in both graft and sealant product lines.

Benefiting from product launches and an enhanced sales force performance, the company envisions faster organic growth during the second half of 2019.

Zacks Rank & Other Key Picks

Integra LifeSciences carries a Zacks Rank #2 (Buy). Some other top-ranked stocks also boasting solid results this earning season are Stryker Corporation SYK, Abbott Laboratories ABT and CONMED Corporation CNMD, each carrying a Zacks Rank of 2.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered first-quarter 2019 adjusted EPS of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion met the Zacks Consensus Estimate.

Abbott reported first-quarter 2019 adjusted EPS of 63 cents, trumping the Zacks Consensus Estimate by 3.3%. Worldwide sales totaled $7.54 billion, exceeding the Zacks Consensus Estimate of $7.47 billion.

CONMED’s first-quarter 2019 adjusted EPS of 57 cents topped the Zacks Consensus Estimate of 54 cents. Revenues of $218.4 million also outshined the Zacks Consensus Estimate of $213 million.

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