Why Is Integer (ITGR) Up 9.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Integer (ITGR). Shares have added about 9.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Integer due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Integer Holdings Q1 Earnings & Revenues Top Estimates

Integer Holdings Corporation reported first-quarter 2020 adjusted earnings per shareof $1.25, which surpassed the Zacks Consensus Estimate of $1.06 by 17.9%. The bottom line also improved 25% on a year-over-year basis.

Revenues improved 4.4% year over year to $328.4 million on a reported basis. Further, the top line beat the Zacks Consensus Estimate by 4.9%.

Segmental Analysis

Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales.

Medical Sales

At the segment, reported revenues were $318.3 million, up 5.7% year over year. Revenues improved 5.4% from the prior-year quarter on an organic basis.

Medical Sales has three sub-segments — Advanced Surgical, Orthopedics and Portable Medical (AS&O); Cardio & Vascular; and Cardiac & Neuromodulation.

Advanced Surgical, Orthopedics and Portable Medical

Integer Holdings’ Advanced Surgical, Orthopedics& Portable Medical segment has been divested to Viant. Consequently, revenues at the segment include net sales from the acquirer Viant under supply agreements associated with the divestiture.

Revenues amounted to $31.2 million, down 1.1% on both year-over-year and organic basis. Per management, the downside can be attributed to lower Portable Medical battery demand. However, higher end-market demand for advanced surgical and orthopedic products offset the downside.

Cardio & Vascular

Revenues at the segment totaled $179.2 million, up 17.5% from the prior-year quarter and 16.8% organically. Per management, the upside can be attributed to a substantial rise in peripheral vascular demand from a customer’s continued launch of an existing program into a new geographyand overall market growth. The segment also benefited from incremental sales from the start of a customer contract on existing business.

Cardiac & Neuromodulation

Revenues at this segment totaled $107.8 million, declining 7.8% on both year-over-year and organic basis.This can be attributed to Nuvectra bankruptcy ($6 million) and headwinds from 2019 supply agreement commitments. However, solid CRM growth from product launched and higher battery demand was partially offset by the impact of signing a customer contract on existing business in the prior year.

Non-Medical Sales

Reported revenues at the segment totaled $10.2 million, down 25.3% on both year-over-year and organic basis.

Margin Analysis

Integer Holdings generated a gross profit of $96.7 million in the first quarter, up 9.1% year over year. As a percentage of revenues, gross margin in quarter expanded 120 basis points (bps) to 29.4%.

Selling, general and administrative expenses (SG&A) were $36.5 million, up 4.3% year over year.

Research, development and engineering costs grossed $13.2 million in the quarter, up 14.2% year over year.

Total operating income amounted to $44.1 million, up 12.5% year over year.
Operating margin in the quarter under review was 13.4%, up 100 bps year over year.

2020 Guidance

The company has decided to suspend its previously issued full-year 2020 guidance on account of the uncertainty surrounding the impact and recovery period of the COVID-19 pandemic. Integer Holdings anticipates the pandemic to lower sales and profits on a temporary basis.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -13.24% due to these changes.

VGM Scores

Currently, Integer has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Integer has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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