Here’s why you should keep Integra (IART) stock for now
Holding company Integra LifeSciences The IART is strengthening its position in the Codman Specialty Surgical (“CSS”) segment. The company ended the third quarter of 2021 with better than expected results. Sales of the recently introduced CereLink ICP Monitor System buoy optimism. The gradual commercialization of the Aurora Surgiscope also seems promising. However, escalating spending and headwinds related to COVID are cause for apprehension.
Over the past year, Zacks Rank # 3 (Hold) stock has gained 22.9%, surpassing the industry’s 13.6% growth. This compares to the 29.9% rise in the S&P 500.
The renowned medical device company has a market capitalization of $ 5.66 billion. Its third quarter 2021 profits were 19.4% higher than Zacks’ consensus estimate.
Over the past five years, the company has posted earnings growth of 8.9%, ahead of the industry’s 3.3% gain and the S&P 500’s 2.8% increase. The company’s long-term run of 13.2% compares to the industry’s projection of 15.6% and the S&P 500’s projected growth of 11.7%.
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Let’s dig deeper.
Factors in play
Benefits of the 3rd trimester: Integra ended the third quarter of 2021 on a bullish note with better than expected earnings and revenue. Year-over-year growth in the CSS segment encourages optimism. The continued upturn in sales across all geographies and product lines also looks encouraging. Strong organic growth in Neurosurgery, Instrumentation, Wound Reconstruction and Private Label business in the reported quarter compared to 2020 and 2019 is an added benefit. Additionally, the company has raised its EPS forecast for 2021.
CSS offers solid perspectives: CSS segment revenue grew 7.2% year-over-year on a reported basis (up 8% organically) in the third quarter of 2021. This improvement can be attributed to 6% growth in neurosurgery worldwide as well as 15% growth in instruments year-over-year. on an organic basis. Instrument sales benefited from a robust recovery in order demand during the quarter. Meanwhile, the strength of neurosurgery was widespread, including sales of the new CereLink ICP monitoring system. Geographically, CSS segment sales grew by around 8%, both in the US and overseas, compared to the previous year.
Strong focus on portfolio optimization: We are optimistic about the launch of the company’s new CereLink in the US and Europe in the third quarter. CereLink raises the bar in PKI monitoring to improve accuracy, usability and advanced data presentation. The company also initiated a phased market launch of the Aurora Surgiscope to a selected group of key opinion leaders for clinical evaluation during the third quarter. Aurora is a minimally invasive surgical solution with integrated visualization and capabilities used to perform neurosurgery. With respect to ACell, Integra proposed strategies such as increasing surgeon training and education programs, as well as adding commercial resources in certain territories, in order to generate robust long-term growth.
Increased expenses: In the third quarter, Integra’s SG&A expenses increased 3.9%, while research and development (R&D) expenses increased 32.7%. These growing operating expenses are putting significant pressure on the company’s bottom line, causing both margins to shrink.
Headwinds linked to COVID: Although Integra’s performance in the first half of 2021 reflects a strong recovery in the impact of COVID, the emerging and more contagious new strain of the virus could disrupt business again. During its earnings call for the third quarter of 2021, the company noted that the impact of the deadly Delta variant of COVID-19 and hospital staff shortages have resulted in procedural postponements in parts of the United States, from Europe and Australia during the quarter under review.
Natural disasters could hamper the business process: Many of Integra’s manufacturing, development or research facilities are vulnerable to natural disasters or adverse events which, depending on their severity, could force the company to cease development and manufacture of some or all of its products. Although the company maintains property damage and business interruption insurance coverage for these facilities, management is concerned that the insurance may not cover all losses in such dire circumstances.
Estimate the trend
Integra has witnessed a positive estimate revision trend for 2021. Over the past 90 days, Zacks’ consensus estimate for its earnings rose 4.7% northward to $ 3.15 .
Zacks’ consensus estimate for Q4 2021 revenue is set at $ 403.3 million, which suggests a 3.8% increase from the figure released a year ago.
Other key choices
Some actions better classified in the wider medical space are AMN Health Services, Inc. AMN, Omnicell, Inc. OMCL and NextGen Healthcare, Inc. NXGN.
AMN Healthcare, ranked # 1 in Zacks (strong buy), has a long-term profit growth rate of 16.2%. The company has beaten earnings estimates over the past four quarters, delivering an average surprise of 19.5%. You can see The full list of today’s Zacks # 1 Rank (Strong Buy) stocks here.
AMN Healthcare has outperformed its industry over the past year. AMN gained 75.6% against a decline of 47.8% of the industry.
Omnicell, carrying a Zacks Rank # 2 (Buy), has a long-term earnings growth rate of 16%. The company has beaten earnings estimates in the past four quarters, delivering a surprise of 17.4% on average.
Omnicell has outperformed its industry over the past year. The OMCL gained 71.9% against the 36.2% drop in the industry.
NextGen, sporting a Zacks Rank # 2, has a long-term earnings growth rate of 8.5%. The company has beaten earnings estimates over the past four quarters, delivering an average surprise of 16%.
NextGen has outperformed the industry it belongs to in the past year or so. NXGN was down 5.5% from the industry’s 36.2% drop.
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