On Jun 26, 2014, Zacks Investment Research downgraded Integra Lifesciences Holdings Corporation (IART) to a Zacks Rank #4 (Sell).
Why the Downgrade?
Integra Lifescienceshas witnessed downward estimate revisions for 2014 and 2015 following tepid first-quarter performance with earnings missing and revenues marginally beating the Zacks Consensus Estimate.
Although adjusted earnings per share of this NJ-based manufacturer and distributor of medical instruments and surgical implants surged 83.9% year over year in the quarter, it missed the Zacks Consensus Estimate by a penny.
Revenues for the quarter increased 9.4% year over year, marginally beating the Zacks Consensus Estimate. However, excluding the revenues from the DuraSeal acquisition (which closed during the first quarter) and from discontinued products, and the effect of currency exchange rates, revenues increased by a mere 3%.
We are concerned about the company’s U.S. Spine business which experienced a massive 7% fall in revenues due to the company's dismal performance in the hardware business. Also, revenues from the U.S. Instruments segment dropped 3% from the prior-year quarter, owing to a product line transfer from U.S. Extremities in the quarter. Product terminations and lower retractor sales affected top-line growth.
Over the past several quarters, Integra Lifesciences has been witnessing weak revenues across its U.S. Spine and Others segments owing to continued pricing pressure and challenging market conditions. Although the company is leaving no stone unturned to consolidate its operations, the near-term outlook is bleak.Further, Integra faces competition from several larger players in both the neurosurgery and orthopedics markets.
In addition, Integra Lifesciences believes that the change in accounting policy for the medical device tax has the potential to dent net earnings per share by approximately 5 cents in 2014. The bearish 2014 outlook also fails to indicate any near-term catalyst that may improve the economic scenario in the near future.
The Zacks Consensus Estimate for 2014 is down 4.9% to $2.94 per share over the last 60 days as all the 13 analysts covering the stock lowered their estimates. The same for 2015 fell 2.4% to $3.32 per share as 11 out of 12 estimates were lowered over the same time frame without any upside movement.
Other Stocks to Consider
While Integra Lifesciences’ Zacks Rank does not call for investor attention, some better-ranked stocks in the similar industry include Actelion Ltd. (ALIOF), ANI Pharmaceuticals, Inc. (ANIP) and Biogen Idec Inc. (BIIB). All the three stocks sport a Zacks Rank #1 (Strong Buy).
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