Why Is Teleflex (TFX) Up 8.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Teleflex (TFX). Shares have added about 8.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Teleflex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Teleflex Earnings and Revenues Beat Estimates in Q1

Teleflex’s adjusted earnings per share from continuing operations of $2.72 for the first quarter of 2020 were up 21.4% year over year. The bottom line also surpassed the Zacks Consensus Estimate by 18.3%.

GAAP earnings per share for the first quarter was $2.78, reflecting a massive surge from the year-ago 89 cents.

Revenues in Detail

Net revenues in the first quarter rose 2.8% year over year to $630.6 million and 4% on a constant exchange rate or CER. The top line surpassed the Zacks Consensus Estimate by 2%.

Segmental Revenues

In the first quarter, the Vascular Access segment reported net revenues of $150.3 million, up 4.4% year over year and 5.6% at CER. The company registered strong growth in PICC (Peripherally Inserted Central Catheters) and EZ-IO.

The Interventional business registered net revenues of $99.9 million, reflecting a 3.2% fall on a year-over-year basis and 2.3% at CER. Revenues were dented by declines in complex and drainage catheters, one less selling day and the divestiture of the catheter reprocessing product line. The segment was also adversely impacted by the coronavirus pandemic due to the cancellation of certain nonemergent procedures. However, higher sales of intra-aortic balloons, OnControl and MANTA were recorded in the quarter.

Within the Anesthesia segment, net revenues dropped 5.7% to $75.7 million on a year-over-year basis and 3.9% at CER, primarily owing to lower sales of laryngeal masks and certain regional Anesthesia products as well as the impact of one less selling day.

The Surgical segment recorded net revenues of $75.4 million, reflecting a 13% fall on a year-over-year basis and 11.5% at CER due to the coronavirus outbreak, shutdown of the Sterigenics Atlanta plant and a one less selling day.

Revenues of $74.2 million in the Interventional Urology segment grew 24.2% on a year-over-year basis and 24.3% at CER. The uptick was primarily led by robust growth rate of UroLift till the first two weeks of March. However, the cancellation of elective procedures because of COVID-19 impacted this product line.

Meanwhile, OEM recorded revenue growth of $63.4 million, up 16.9% on a year-over-year basis and 17.5% at CER. The uptick resulted from a mixture of additional revenue arising from the HPC acquisition and an increase of sales of existing products.

The Other product segment (consisting of the company’s respiratory and urology care products) registered net revenues of $91.7 million, highlighting growth of 7.2% year over year and 9.2% at CER. The growth was primarily supported by increased demand for respiratory products, such as filters and humidification, resulting from COVID-19.

Margins

In the reported quarter, gross profit totaled $333.6 million. Gross margin expanded 10 basis points (bps) to 52.9% on a 2.9% rise in gross profit.

Selling, general and administrative expenses contracted 28.6% to $147.8 million in the quarter under review, while research and development expenses rose 0.9% to $27.4 million.

Overall adjusted operating profit was $158.4 million, up 76.2% year over year. However, adjusted operating margin saw a massive surge of 1047 bps year over year to 25.1%.

Liquidity Position

Teleflex exited the first quarter with cash and cash equivalents of $406.5 million, up from $301.1 million at the end of 2019.

Cash flow used in operating activities from continuing operations was $11.5 million at the end of first-quarter 2020 compared with net cash provided by operating activities of $60.2 million in the year-ago period.

2020 Outlook

Teleflex is currently unable to ascertain the scope and duration of the pandemic as well as quantify the actual impact. The company also anticipates material disruption caused by the evolving COVID-19 pandemic and macroeconomic environment. It further expects significant adverse financial impact of the coronavirus pandemic. Accordingly, it has withdrawn its financial guidance for 2020 which was initially issued on Feb 20.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -44.16% due to these changes.

VGM Scores

Currently, Teleflex has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Teleflex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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