3 Reasons to Retain Integer Holdings (ITGR) Stock For Now
ITGR
November 29, 2021, 11:55 AM ·5 min read
Integer Holdings Corporation ITGR is well-poised for growth in the coming quarters, backed by its improving non-medical sales. A robust third-quarter 2021 performance, along with its focus on various growth strategies, is 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 surged 15.5% compared with 8.9% growth of the industry it belongs to and the S&P 500 composite's rise of 27.6%.
The renowned medical device outsource manufacturer has a market capitalization of $2.75 billion. The company projects 18.3% growth for 2022 and expects to maintain its strong performance. It has delivered an earnings surprise of 13.57% for the past four quarters, 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 third quarter of 2021, revenues at the Non-Medical Sales segment rose 14.5% year over year, both on a reported and an organic basis. Sales at the Electrochem product line, a part of the Non-Medical segment, improved 14% on the back of continued recovery of the energy market. Management is also optimistic about the continued recovery in the energy market in the second half of 2021 and into 2022.
Growth Strategy: We are optimistic about Integer Holdings' recently announced new approach to drive sales and profit growth following a comprehensive strategic review of the business. Management, during the third-quarter 2021 earnings call in October, announced plans to acquire Oscor, which is expected to expand the company's highly differentiated cardiovascular access and neurostimulation lead wire finished product offerings in fast-growing end markets, aligned with the company's growth strategy. The company's ongoing strategy to deploy an annual acquisition capacity of $200 million to $250 million raises optimism.
Strong Q3 Results: Integer Holdings' robust third-quarter results raise our optimism. Robust segmental performances, along with strength in the majority of the product lines, were impressive. Despite the U.S. labor constraints and global supply chain disruptions, continued business recovery is encouraging. Expansion of gross margin also bodes well for the stock. A raised adjusted earnings per share (EPS) outlook for the year and management's expectations of a strong sales growth in the fourth quarter of 2021 raise optimism.
Stiff Competition: Competition with respect to the manufacturing of Integer Holdings' medical products across all of its product lines has intensified in recent years and may continue to intensify 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.
Estimate Trend
Integer Holdings is witnessing a positive estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 1.8% north to $4.05.
The Zacks Consensus Estimate for the company's fourth-quarter 2021 revenues is pegged at $304.6 million, suggesting a 13.3% rise from the year-ago quarter's reported number.
Key Picks
Some better-ranked stocks in the broader medical space that have announced quarterly results are West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and Chemed Corporation CHE.
West Pharmaceutical, carrying a Zacks Rank #2 (Buy), reported third-quarter 2021 adjusted EPS of $2.06, which beat the Zacks Consensus Estimate by 13.2%. Third-quarter revenues of $706.5 million outpaced the consensus mark by 3.2%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
West Pharmaceutical has an estimated long-term growth rate of 27.6%. The company surpassed estimates in the trailing four quarters, the average surprise being 29.38%.
Thermo Fisher reported third-quarter 2021 adjusted EPS of $5.76, which surpassed the Zacks Consensus Estimate by 23.3%. Third-quarter revenues of $9.33 billion outpaced the Zacks Consensus Estimate by 12%. It currently carries a Zacks Rank #2.
Thermo Fisher has an estimated long-term growth rate of 14%. The company surpassed estimates in the trailing four quarters, the average surprise being 9.02%.
Chemed reported third-quarter 2021 adjusted EPS of $5.06, which surpassed the Zacks Consensus Estimate by 13.5%. Third-quarter revenues of $538.7 million outpaced the Zacks Consensus Estimate by 1.3%. It currently has a Zacks Rank #2.
Chemed has an estimated long-term growth rate of 7.7%. The company surpassed estimates in three out of the trailing four quarters, the average surprise being 5.59%.
Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
West Pharmaceutical Services, Inc. (WST) : Free Stock Analysis Report
Chemed Corporation (CHE) : Free Stock Analysis Report
Integer Holdings Corporation (ITGR) : Free Stock Analysis Report