Integer Holdings Corporation ITGR is well-poised for growth in the coming quarters, courtesy of its improving non-medical sales. The optimism led by a solid first-quarter 2023 performance and its solid foothold in the broader MedTech space are expected to contribute further. However, dependence on third-party suppliers and stiff competition continue to concern the company.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 7.5% compared with a 1.3% rise of the industry it belongs to and the S&P 500 composite’s growth of 3.1%.
The renowned medical device outsource manufacturer has a market capitalization of $2.75 billion. The company projects 11.9% growth for the next five years and expects to maintain its strong performance. Integer Holdings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an earnings surprise of 1.7%, on average.
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Let’s delve deeper.
Improving Non-Medical Sales: We are upbeat about Integer Holdings’ improvement in its Non-Medical sales. In the first quarter of 2023, revenues at the Non-Medical Sales segment rose 63.4% year over year. The upside was driven by strong sales at the Electrochem product line, part of the Non-Medical segment, across all market segments and continued supplier delivery recovery.
Solid Foothold in the Broader MedTech Space: We are optimistic about Integer Holdings’ stable footing in the cardiac, neuromodulation, orthopedics, vascular and advanced surgical markets. Its primary customers include large, multi-national original equipment manufacturers and their affiliated subsidiaries.
Integer Holdings has been focusing on its sales efforts to increase its market penetration in the Cardio & Vascular, Neuromodulation and Non-Medical Electrochem markets. The company is also making strategic initiatives to maintain its leadership position in the cardiac rhythm management market.
Strong Q1 Results: Integer Holdings’ robust first-quarter 2023 results raise our optimism. The company registered strong year-over-year top-line and bottom-line performances. Robust performances by both segments and strength in all three product lines of the Medical Sales segment were also recorded. The expansion of the adjusted operating margin bodes well for the stock.
Stiff Competition: Competition with respect to the manufacturing of Integer Holdings’ medical products across all its product lines has intensified in recent years and may continue to do so in the future. The market for commercial power sources is competitive, fragmented and subject to rapid technological change. Many other commercial power source suppliers are larger than Integer Holdings and have greater resources, which may help them develop superior (technologically or otherwise) or more cost-effective products than the latter, thus resulting in lower revenues and operating results for Integer Holdings.
Dependence on Third-Party Suppliers: Integer Holdings’ business depends on a continuous supply of raw materials, which may be susceptible to fluctuations due to transportation issues, government regulations and price controls, among others. Significant increases in the cost of raw materials, which cannot be recovered through increases in the prices of the company’s products, could adversely affect its operating results.
Integer Holdings is witnessing a positive estimate revision trend for the current year. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 0.7% north to $4.15 per share.
The Zacks Consensus Estimate for the company’s second-quarter 2023 revenues is pegged at $367 million, suggesting a 4.8% rise from the year-ago quarter’s reported number.
Some better-ranked stocks in the broader medical space are Hologic, Inc. HOLX, Merit Medical Systems, Inc. MMSI and Boston Scientific Corporation BSX.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 5.1% for fiscal 2024. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average being 27.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has gained 3.1% compared with the industry’s 1.3% growth in the past year.
Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.
Merit Medical has gained 36.8% compared with the industry’s 7.2% rise over the past year.
Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 1.9%.
Boston Scientific has gained 29.1% against the industry’s 31.9% decline over the past year.
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