Integra LifeSciences Holdings Corporation
IART
is well poised for growth in the coming quarters backed by its robust growth in international business and strong focus on portfolio optimization. However, lower demand for surgical procedures due to pandemic mayhem and year-over-year decline in revenues in the fourth quarter is a concern.
In the past year, shares of this Zacks Rank #3 (Hold) company outperformed the
industry
. Shares of the company have surged 54% compared with 41.9% growth of the industry. While the company has underperformed the S&P 500 with 54% growth compared with the S&P 500 rise of 55.1%.
Integra LifeSciences has a market cap of $5.80 billion. The company projects 12.5% growth for the next five years. The company surpassed estimates in three of the trailing four quarters and missed in one quarter. It has a trailing four-quarter earnings surprise of 86.59%, on average.
Riding on the company’s current business situation and near-term prospects, this stock is worth holding on to, for now.
What’s Working in Favor of the Stock?
Strong Focus on Portfolio Optimization:
We are upbeat about Integra reshaping its portfolio with a strategic divestiture during its process to acquire ACell. In January 2021, the company announced divestment of its Extremity Orthopedics business to focus more on its profitable business. With this divestiture, Integra claims itself to be in an even stronger position to capitalize on its core products and technologies in neurosurgery and regenerative medicine as well as provide greater value to customers and shareholders. Notably, Integra is likely to strengthen its balance sheet and increase financial agility with the portfolio optimization.
Solid Growth in International Business:
In spite of facing foreign exchange fluctuations across its international business, Integra successfully saw through certain key developments on the overseas front. International sales within Codman Specialty Surgical have been strong in recent times driven by growth in core neurosurgery business and strength in certain key markets like Europe, Canada, China and Japan. On a global basis, Integra accelerated investments in digital capabilities that will enable the commercial teams to reach a broader customer base.
Downsides
On the flip side, there are some factors that have been deterring the stock’s rally, of late.
Dull Top-line Show in Q4:
In the fourth quarter, Integra’s total revenues dropped 1.6% year over year. The company also registered disappointing segmental performance within OTT and CSS segment due to coronavirus-led business disruptions. Also, contraction of gross margin is a concern. The impact from discontinued products is expected to continue to decline and will have a negative impact of approximately 1.3% on 2021 revenues, which is a concern.
COVID-19-Led Postponement of Surgical Procedures Dent Sales:
We are worried about Integra LifeSciences declining demand for surgical procedures since March, as the pandemic took a graver form. This was because healthcare providers started to reallocate resources to address the surging demand caused by the COVID-19 outbreak.
Estimate Trends
Integra LifeSciences is witnessing a positive estimate revision trend for the current year. In the past 30 days, the Zacks Consensus Estimate for earnings has moved 0.34% north to $2.89.
The Zacks Consensus Estimate for 2021 revenues is pegged at $1.53 billion, suggesting 11.4% growth from the year-ago reported number.
Key Picks
A few other better-ranked stocks from the broader medical space are
Penumbra, Inc.
PEN
,
Cantel Medical Corp.
CMD
and
ConforMIS, Inc.
CFMS
, each carrying a Zacks Rank #2. You can see
the complete list of Zacks #1 Rank (Strong Buy) stocks here.
Penumbra has a projected long-term earnings growth rate of 29%.
Cantel Medical has a projected long-term earnings growth rate of 19%.
ConforMIS has an estimated long-term earnings growth rate of 42%.
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