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Teleflex (TFX) Beats on Q4 Earnings and Revenues, Margins Fall

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Zacks Equity Research
·6 min read
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Teleflex Incorporated’s TFX adjusted earnings per share (“EPS”) from continuing operations of $3.25 for the fourth quarter of 2020 were down 0.9% year over year. However, the bottom line surpassed the Zacks Consensus Estimate by 7.3%.

GAAP EPS for the fourth quarter was $1.62, reflecting a 28.9% plunge from the year-ago $2.28.

Full-year adjusted EPS was $10.67, reflecting a 4.3% decrease from the year-ago period. However, the metric surpassed the Zacks Consensus Estimate by 2%.

Revenues in Detail

Net revenues in the fourth quarter rose 4.4% year over year to $711.2 million and 2.3% on a constant exchange rate or CER. The top line surpassed the Zacks Consensus Estimate by 3.6%.

Per the company’s estimates, COVID-19 had a net negative impact on revenues of approximately $61 million or 9%.

Full-year revenues were $2.54 billion, reflecting a 2.2% fall from the year-ago period (down 2.4% at CER). Again, the metric surpassed the Zacks Consensus Estimate by 1.2%.

Teleflex Incorporated Price, Consensus and EPS Surprise

Teleflex Incorporated Price, Consensus and EPS Surprise
Teleflex Incorporated Price, Consensus and EPS Surprise

Teleflex Incorporated price-consensus-eps-surprise-chart | Teleflex Incorporated Quote

Segmental Revenues

In the fourth quarter, the Vascular Access segment reported net revenues of $182.5 million, up 16% year over year at CER. The company registered strong growth within PICC, CVC and EZ-IO products. COVID-19 had a 5% positive impact on this segment’s sales in the fourth quarter.

The Interventional business registered net revenues of $106.7 million, down 6.9% on a year-over-year basis at CER. Revenues were largely dented by delay in the recovery of certain non-emerging procedures, along with the negative impact stemming from a catheter recall and distributor conversion in Japan that occurred during the sequentially last-reported quarter. COVID-19 had a 12% negative impact on this segment’s sales in the fourth quarter.

Within the Anesthesia segment, net revenues dropped 2.1% to $86.1 million, primarily owing to lower sales of laryngeal masks and endotracheal tube products. COVID-19 had an approximately 1% negative impact on this business in the quarter.

The Surgical segment recorded net revenues of $92.3 million, reflecting 5.7% fall at CER due to lower sales of ligation portfolio. The company witnessed a 9% headwind from COVID-19 on this business.

Revenues of $93.9 million in the Interventional Urology segment improved 5.3% on a year-over-year basis at CER. The continued recovery of elective procedures contributed to this business in the fourth quarter. Teleflex estimated an approximate 28% COVID-19-related headwind in the fourth quarter on this business.

Meanwhile, OEM recorded revenue growth of $51.7 million, down 6.9%. This business saw aligned impact of COVID-19 relative to other businesses. COVID-19 had an approximately 38% negative impact on this business in the quarter.

The Other product segment (consisting of the company’s respiratory and urology care products) registered net revenues of $98.1 million, highlighting growth of 6.1% at CER. The growth was primarily supported by increased demand for certain humidification and respiratory products resulting from COVID-19. COVID-19 had an approximately 1% positive impact on this business in the quarter.

Margins

In the reported quarter, gross profit totaled $383.6 million, up 1.5% year over year. Gross margin contracted 154 basis points (bps) to 53.9%.

Overall adjusted operating loss was $232.9 million compared with adjusted operating loss of $220.1 million in the year-ago period.

Liquidity Position

Teleflex exited 2020 with cash and cash equivalents of $375.9 million, up from $301.1 million at the end of 2019.

Cumulative cash flow provided by operating activities from continuing operations at the end of 2020 was $437.14 million compared with $437.07 million in the year-ago period.

2021 Outlook

Teleflex has issued its financial guidance for 2021.

Revenue growth for 2021 is expected to lie in the range of 10-11.5% from comparable figure in 2020 (up 8-9.5% at CER).

The company projects its adjusted EPS from continuing operations to be between $12.50-$12.70 for 2021, reflecting an increase of 17.2-19% from comparable figure in 2020. The Zacks Consensus Estimate for the same is currently pegged at $12.62.

Our Take

Teleflex reported better-than-expected fourth-quarter results. There has been significant sequential improvement across many of the company’s product categories and geographies on gradual recovery of the economy. Geographically, the company’s performance was strong in the Americas (driven by strong sales of Vascular Access and respiratory products, both of which saw coronavirus-led elevated demand) and EMEA, with improving trends in Asia, which is impressive amid the pandemic-led challenging business environment. Product launches during the reported quarter buoy optimism on the stock.

However, earnings declined significantly on a year-over-year basis, which is worrying. Most of the segments registered revenue decline at CER due to aggregated negative impact from COVID-19, raising concerns. Margin debacle along with continued operating loss is another major concern.

Zacks Rank and Key Picks

Teleflex currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Abbott Laboratories ABT, Hologic, Inc. HOLX and IDEXX Laboratories, Inc. IDXX.

Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Fourth-quarter worldwide sales of $10.7 billion outpaced the consensus mark by 7.9%. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, beating the Zacks Consensus Estimate by 33.6%. The company currently carries a Zacks Rank #2.

IDEXX reported fourth-quarter 2020 adjusted EPS of $2.01 which surpassed the Zacks Consensus Estimate by 40.6%. Revenues of $720.9 million beat the consensus mark by 5.8%. The company currently carries a Zacks Rank #2.

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