It has been about a month since the last earnings report for Integra LifeSciences (IART). Shares have lost about 1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Integra due for a breakout? 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 catalysts.
Integra LifeSciences Posts Earnings Beat, Margins Up
Integra LifeSciences delivered adjusted earnings per share (EPS) of 73 cents in the second quarter of 2019, up 21.7% from a year ago. The same surpassed the Zacks Consensus Estimate by 12.3%.
Total revenues in the reported quarter inched up 4.8% year over year to $383.6 million. This figure beat the Zacks Consensus Estimate by 2.7%. Excluding revenues from the current-period acquisitions, product discontinuations and the effect of currency exchange rates, organic revenues rose 6.6% year over year, in line with the earlier guidance for 2019.
Coming to product categories, revenues from the Codman Specialty Surgical segment rose 4.1% to $249.3 million. The upside was driven by the commercial launch and positive customer reception of several new products like CereLink , CertasPlus , and the Integra DUO.
Orthopedics and Tissue Technologies revenues totaled $134.4 million in the second quarter, up 6.1% year over year. The improvement was fueled by sales growth in the Wound Reconstruction segment on strength in products like MediHoney and Total Contact Cast, as well as advanced tissue products portfolio.
For the reported quarter, gross profit totaled $239.9 million. Gross margin expanded 12 basis points (bps) to 62.6% in the reported quarter on a 4.9% rise in gross profit. Selling, general and administrative expenses dropped 6.4% to $165.4 million in the quarter under review while research and development expenses contracted 7.7% to $17.6 million. Operating profit came in at $56.9 million. Overall, adjusted operating margin saw a 586-bps expansion to 14.8% in the second quarter.
Integra LifeSciences exited the second quarter with cash and cash equivalents of $176.1 million, up from $157 million at the end of the first quarter. Year to date, net cash flow from operating activities in the second quarter was $78 million, up from $77.7 million a year ago.
Integra LifeSciences has reaffirmed its revenue guidance for 2019. The company expects 2019 revenues in the range of $1.51-$1.52 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 raised its adjusted earnings per share to the band of $2.70-2.75 from the earlier $2.65-2.72. The Zacks Consensus Estimate for 2019 adjusted earnings stands at $2.70, near the low end of the company’s guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
At this time, Integra has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Integra has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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