On Jul 3, 2014, we issued an updated research report on Integra LifeSciences Holdings Corporation (IART) – a forerunner in regenerative medicine. While we are impressed with the company’s better-than-expected earnings and revenue performance in the second quarter of 2014, the bearish outlook for the full year raises concerns.
Adjusted earnings per share of 68 cents in the second quarter of 2014 were up a significant 28.3%, ahead of the Zacks Consensus Estimate by 5 cents. Total revenue increased 12.6% year over year, also beating the Zacks Consensus Estimate by 1% on solid DuraSeal sales and strong performance of the global neurosurgery business.
Over the past several quarters, Integra has been witnessing weak revenues across its U.S. Spine and Others segment, owing to continued pricing pressure and challenging market conditions. Although, for the first time since the fourth quarter of 2012, the segment experienced 4% year-over-year improvement in the quarter, sustainability remains a matter of worry.
Overall, the U.S. Spine business was relatively flat as the small decline in spine hardware was offset by an increase in biologics. We are also upset with the poor fiscal 2014 guidance which stated that U.S. Spine and Others revenues is likely to decrease in low-to-mid single digits.
However, we are currently impressed with the strong momentum of its new and improved Neurosurgery product line post the acquisition of DuraSeal products from Covidien plc (COV), and expect this to boost growth in the coming period.
According to Integra, the DuraSeal product line is a strategic fit for its Neurosurgery division that will complement business growth in 2014. In addition to its strategic value, DuraSeal will add scale and increase profitability without further complicating the company’s structure. The reported quarter, being the first one post-closure of the DuraSeal acquisition, has already contributed a decent share to the company’s Neurosurgery business.
Integra currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
However, investors interested in the sector can consider stocks like Illumina Inc. (ILMN) and Biogen Idec Inc. (BIIB). Both the stocks sport a Zacks Rank #1 (Strong Buy).
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