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Integra (IART) Q4 Earnings Top Estimates, Revenues Fall Y/Y

Integra LifeSciences Holdings Corporation IART delivered adjusted earnings per share (EPS) of 84 cents in the fourth quarter of 2020, up 23.5% from a year ago. The metric surpassed the Zacks Consensus Estimate by 13.5%. According to the company, the year-over-year improvement was the result of the company’s implementation of expense reduction measures during the pandemic to mitigate the impact of lower sales.

The adjustment excludes the impact of certain non-recurring charges like structural optimization, divestiture, acquisition and integration, COVID-19 and intangible asset amortization expenses, among others.

GAAP EPS for the fourth quarter was $1.09 against the year-ago quarter’s loss of 18 cents.

Adjusted EPS was $2.45 for the year, reflecting a 10.6% decrease from the year-ago period. The figure however surpassed the Zacks Consensus Estimate by 3.8%.

Revenue Discussion

Total revenues in the reported quarter declined 1.6% year over year to $388.6 million. However, the metric exceeded the Zacks Consensus Estimate by 0.3%. Organically, revenues dropped 1.5% year over year.

Although revenues were lower during the fourth quarter, Integra recorded a 5% revenue increase on a sequential basis on continued growth of franchises and products in the fourth quarter of fiscal 2020.

Notably, the quarter’s figure matches the high end of the company’s preliminary estimate of $387-$389 million announced in January.

Integra LifeSciences Holdings Corporation Price, Consensus and EPS Surprise

 

Revenues for the year were $1.37 billion, down 9.6% from the year-ago period. The metric was in line with the Zacks Consensus Estimate. Organically, the company’s revenues fell 8.7% for the year.

Segmental Details

Coming to product categories, revenues from the Codman Specialty Surgical (“CSS”) segment fell 2% year over year on a reported basis to $254.3 million (organically, the decline was 1.6%). However, the segment’s global neurosurgery sales witnessed a strong recovery from the sequential decline in revenues. Also, sales in neuromonitoring and CSS management increased low-double digits. Sales in dural access and repair and CSS management rose low-single digits and mid-single digits respectively during the quarter under review.

Orthopedics and Tissue Technologies (“OTT”) revenues totaled $134.4 million in the fourth quarter, down 1% year over year on reported basis and 1.3% on organic basis. During the fourth quarter, sales in wound reconstruction declined 1.5% compared to prior year but sales of SurgiMend, nerve and amniotic increased double digits and sales of Integra skin rose low-single digits. Fourth-quarter sales in private label also increased 2%, in line with the company expectations.

Margin Trend

In the reported quarter, gross profit totaled $241.6 million, down 1.7% year over year. Gross margin contracted 1 basis point (bps) at 62.2%. The company-adjusted gross margin of 68.2% was also down 1 bps.

Selling, general and administrative expenses contracted 6.8% to $162.4 million in the quarter under review, while research and development expenses fell 9.9% to $22.2 million.

Overall, adjusted operating profit was $57 million, up 21.9% year over year. Adjusted operating margin saw a 283-bps expansion year over year to 14.7%.

Financial Position

Integra exited 2020 with cash and cash equivalents of $470.2 million, up from $198.9 million at the end of 2019.

Cumulative net cash flow from operating activities at the end of the fourth quarter was $203.8 million compared with $231.4 million in the year-ago quarter.

2021 Outlook

The company has announced its financial guidance for fiscal 2021.

For 2021, the company expects revenues in the range of $1.52 billion to $1.53 billion. The Zacks Consensus Estimate for the same is pegged at 1.51 billion.

Adjusted earnings per diluted share for fiscal 2021 are expected in the band of $2.86 to $2.93. The Zacks Consensus Estimate for the same is pegged at $2.90.

For first-quarter 2021, the company expects revenues in the range of $345 million to $355 million. The Zacks Consensus Estimate for the same is pinned at $354.2 million.

Adjusted earnings per diluted share in the first quarter of 2021 are expected in the band of 54 to 58 cents. The Zacks Consensus Estimate for the same is pegged at 65 cents.

Our Take

Integra exited the fourth quarter with better-than-expected earnings results. The ongoing recovery within the company’s business looks encouraging. The sequential improvement in segmental revenues, in the fourth quarter, buoys optimism. Robust demand for the company’s products is also a positive. Expansion of operating margin looks encouraging. The company provided financial guidance for fiscal 2021, raising optimism.

However, drop in year-over-year revenues is disappointing. The company witnessed a decline in OTT and CSS segment revenues due to coronavirus-led business disruptions. Contraction of gross margin looks worrying as well.

Zacks Rank and Key Picks

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

A few better-ranked stocks in the broader medical space that have already announced their quarterly results are Abbott Laboratories ABT, AngioDynamics, Inc. ANGO and Hill-Rom Holdings, Inc. HRC, each carrying  a Zacks Rank #2 (Buy).You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Worldwide sales of $10.7 billion in the quarter outpaced the consensus mark by 7.9%.

AngioDynamics reported second-quarter fiscal 2021 adjusted EPS of a penny against the Zacks Consensus Estimate of a loss per share of 2 cents. Revenues of $72.8 million beat the consensus mark by 8%.

Hill-Rom reported first-quarter fiscal 2021 adjusted EPS of $1.53, beating the Zacks Consensus Estimate by 45.7%. Revenues of $741.1 million surpassed the consensus mark by 13.2%.

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