Today’s Daily Alert features a medical device company that makes a wide variety of medical devices, tools and materials. Its products include surgical instruments, implantable devices and many other products used in neurosurgery, orthopedic surgery, plastic surgery and other medical procedures. Here’s the recommendation, from Argus analyst David Toung.
“We are raising our target price on BUY-rated, Focus List selection Integra LifeSciences Holdings Corp. (IART, $38) to $50 from $44. We are also boosting our EPS estimates for both 2012 and 2013. Integra’s strong 2Q12 results point to progress in three key areas highlighted by CEO Peter Arduini when he took the post in January: sales execution, facility remediation and optimization. The strong second-quarter revenue growth in the orthopedics segment also suggests that Integra is growing faster than the market and gaining share in a difficult environment.
Recent Developments
“Integra posted strong second-quarter revenue of $210.2 million, beating the consensus estimate of $207.3 million, suggesting that the company is improving sales execution, a key focus area for CEO Arduini. Revenue grew 8.7% on a reported basis and 10.2% in constant currency. Even after excluding about four percentage points of growth from acquisitions, the organic growth rate of 6% is still very impressive in the current economic environment and much better than that of larger competitors. ... The adjusted gross margin for the quarter was 65.3%, up 50 basis points from 2Q11. This gain was driven by a sales mix shift and improved manufacturing efficiency, offset by higher spending on initiatives to improve enterprise management and reporting. ...
“Along with its 2Q12 report, Integra raised its full-year revenue guidance to $828-$838 million from a prior view of $820-$835 million. On a currency-neutral basis, it now expects to grow revenue 6.5%-8.5%, up from a prior 6.0% -8.0%. ... Based on these factors, we are raising our adjusted EPS estimates to $3.05 from $3.02 for 2012 and to $3.30 from $3.20 for 2013.
Valuation
“IART trades at 11.6-times our 2013 EPS estimate, slightly above the peer group average of 11.1. Our revised target price of $50 implies a multiple of 15.0-times our 2013 EPS estimate.”
- David H. Toung, Argus Weekly Staff Report, July 26, 2012