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Teleflex (TFX) Up 0.7% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Teleflex (TFX). Shares have added about 0.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Teleflex 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.

Teleflex Gains Ground on Growth in Vascular Arm in Q2

Teleflex reported earnings per share (EPS) from continuing operations of $2.66 for the second quarter of 2019, up 7.7% year over year. The bottom line also surpassed the Zacks Consensus Estimate by 2.7%.

Reported EPS came in at $1.77 against a loss of 6 cents in the prior-year quarter.

Net revenues from continuing operations in the second quarter rose 7% year over year to $652.5 million. On a year-over-year basis, the company saw organic constant currency revenue growth of 9.6%. The top line surpassed the Zacks Consensus Estimate by 2.5%.

Revenues in Detail

In the second quarter, the Vascular Access segment recognized net revenues of $153.6 million, up 12% year over year at CER. The company registered strong growth in PICC (Peripherally Inserted Central Catheters), CVCs and EZ-IO.

The Interventional business registered net revenues of $104.8 million, reflecting an 8.8% rise on a year-over-year basis at CER. This upside was backed by higher sales of complex catheters, biologics on-control and intra-aortic balloon products.

Within the Anesthesia segment, net revenues declined 0.9% at CER to $85.7 million primarily due to sluggish sales of airway and pain management products.

Surgical segment recorded net revenues of $95.6 million, reflecting a 9% rise at CER on increased sales of ligation clips and surgical instruments.

Revenues at the Interventional Urology segment saw growth of 42.7% at CER to $67.9 million. The segment of OEM products recorded net revenues of $56.4 million, showing an 8.5% rise at CER.

Meanwhile, EMEA recorded revenue growth of 1.9% at CER to $147.1 million, driven by increased sales of Vascular Access and Interventional Access products.

Asia, OEM and Americas registered net revenues of $75.2 million, $56.4 million and $373.8 million, respectively (corresponding top-line growth of 10%, 8.5% and 13.1% each at CER), in the quarter under review.

Margin

Gross margin of 57.2% in the quarter under discussion expanded 62 basis points (bps) year over year on an 8.2% improvement in gross profits to $372.9 million. Adjusted operating margin expanded 216 bps to 16.7% on a 3.1% rise in operating expenses to $263.8 million.

Liquidity Position

The company exited the second quarter of 2019 with cash and cash equivalents of $303.9 million compared with $271.2 million at the end of the first quarter. Year-to-date net cash provided by operating activities was $157.3 million compared with $181.6 million a year ago.

2019 Outlook

Teleflex has raised its 2019 revenue guidance. Revenues are expected to increase 6-6.5% compared to the earlier projection of 5% to 6%. This reflects an 1.5% unfavorable impact of foreign exchange translation. Moreover, the company raised its 2019 revenue guidance on a constant currency basis to a range of 7.5, from earlier-projected range of 6-7%. The Zacks Consensus Estimate for revenues is pegged at $2.59 billion.

The company reaffirms full-year adjusted earnings per share from continuing operations at the $10.90-$11.10 band, suggesting an increase of 10.1% to 12.1% over 2018 and indicating a 3.5% negative impact from foreign exchange translation. The Zacks Consensus Estimate for the same is pegged at $11.06, near the high end of the company’s guided range.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months.

VGM Scores

At this time, Teleflex has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Teleflex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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