Why Is Teleflex (TFX) Up 2.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Teleflex (TFX). Shares have added about 2.6% in that time frame, underperforming 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 catalysts.
Teleflex Beats on Q4 Earnings and Revenues, Margins Fall
Teleflex adjusted earnings per share 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 earnings per share for the fourth quarter was $1.62, reflecting a 28.9% plunge from the year-ago $2.28.
Full-year adjusted earnings per share 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%.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -14.28% due to these changes.
VGM Scores
At this time, Teleflex has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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