Shares of Teleflex Inc (TFX) scaled a new 52-week high of $123.09 in mid-day trading on Feb 23, closing lower at $121.55 on the same day. The bullish run reflects stimulated investor confidence following the company's better-than-expected fourth-quarter 2014 financial results, a solid outlook and recently executed strategic partnerships.
In fact, the stock rallied nearly 3.5% following the release of Teleflex’s financial numbers on Feb 20, which beat our estimates on both fronts.
Currently, the one-year return of this global medical devices company stands at a healthy 21%, while the year-to-date return is roughly 6%. Teleflex has a market cap of around $5 billion. Average volume of shares traded over the last three months stands at roughly 0.3 million.
Growth Drivers
Teleflex’s revenues continue to be largely driven by synergies from the acquisition of Vidacare Corp. competed in Dec 2013. In the fourth quarter, the acquisition contributed 3.5% growth in constant currency. We are impressed with the strong contribution from Vidacare, which, according to management, is expected to add 40–60 basis points of revenue growth in 2015 as well.
Higher sales volumes of existing products, new product rollouts as well as price increases are also driving revenues for the company. On the other hand, the bottom-line growth is being supported by continued improvements in average selling prices (ASP) and a favorable mix of higher gross margin sales.
We further note that Teleflex has recently entered into several strategic partnerships which should enhance its long-term growth prospects. In Jan 2015, Teleflex signed a strategic agreement with Health Trust covering its PICC and tip location devices. In 2014, Teleflex partnered with Premier Inc to popularize and enhance its dialysis portfolio, while the partnership with Amerinet involves its handheld laparoscopic surgical instruments portfolio.
We believe these strategic alliances will help Teleflex gain better market traction and subsequently improve its top line.
Guidance
Teleflex estimates 2015 revenues to increase 4%–6% on a constant currency basis. The company expects adjusted EPS in the band of $6.10–$6.35 for 2015, reflecting 6.3%–10.6% growth on a year-over-year basis.
However, foreign currency headwind is expected to impact EPS by approximately 14% in 2015.
Zacks Rank
Currently, Teleflex carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the medical instruments industry include Abiomed (ABMD), Luminex Corp. (LMNX) and Fluidigm Corp. (FLDM). While both Abiomed and Luminex sport a Zacks Rank #1 (Strong Buy), Fluidigm carries a Zacks Rank #2 (Buy).
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