Medical device company Integra LifeSciences (NASDAQ:IART) missed Wall Street’s revenue expectations in Q4 CY2024, but sales rose 11.5% year on year to $442.6 million. Next quarter’s revenue guidance of $380 million underwhelmed, coming in 7.7% below analysts’ estimates. Its non-GAAP profit of $0.97 per share was 13.5% above analysts’ consensus estimates.
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Integra LifeSciences (IART) Q4 CY2024 Highlights:
"As I step into my role leading Integra, I am inspired by the strength of our portfolio, the dedication of our team, and the tremendous potential we have to grow and innovate in high-impact specialty markets. Our fourth-quarter results reflect this strength, with sequential revenue growth driven by robust demand for our leading brands, continued progress in expanding our global presence, and our ongoing commitment to improving supply reliability," said Mojdeh Poul, President and CEO.
Company Overview
Founded in 1989, Integra LifeSciences (NASDAQ:IART) develops, manufactures, and markets a broad portfolio of surgical and critical care solutions, including advanced wound care, neurosurgery, and orthopedic products.
Surgical Equipment & Consumables - Specialty
The surgical equipment and consumables industry provides tools, devices, and disposable products essential for surgeries and medical procedures. These companies therefore benefit from relatively consistent demand, driven by the ongoing need for medical interventions, recurring revenue from consumables, and long-term contracts with hospitals and healthcare providers. However, the high costs of R&D and regulatory compliance, coupled with intense competition and pricing pressures from cost-conscious customers, can constrain profitability. Over the next few years, tailwinds include aging populations, which tend to need surgical interventions at higher rates. The increasing integration of AI and robotics into surgical procedures could also create opportunities for differentiation and innovation. However, the industry faces headwinds including potential supply chain vulnerabilities, evolving regulatory requirements, and more widespread efforts to make healthcare less costly.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Integra LifeSciences’s 1.2% annualized revenue growth over the last five years was tepid. This was below our standards and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Integra LifeSciences’s annualized revenue growth of 1.7% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.
Integra LifeSciences also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Integra LifeSciences’s organic revenue was flat. Because this number is lower than its normal revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.
This quarter, Integra LifeSciences’s revenue grew by 11.5% year on year to $442.6 million but fell short of Wall Street’s estimates. Company management is currently guiding for a 3% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and suggests its newer products and services will fuel better top-line performance.
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Operating Margin
Integra LifeSciences has managed its cost base well over the last five years. It demonstrated solid profitability for a healthcare business, producing an average operating margin of 15.6%.
Analyzing the trend in its profitability, Integra LifeSciences’s operating margin decreased by 6.8 percentage points over the last five years. This performance was caused by more recent speed bumps as the company’s margin fell by 9.5 percentage points on a two-year basis. We’re disappointed in these results because it shows its expenses were rising and it couldn’t pass those costs onto its customers.
In Q4, Integra LifeSciences generated an operating profit margin of 8%, down 11.1 percentage points year on year. This contraction shows it was recently less efficient because its expenses grew faster than its revenue.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Sadly for Integra LifeSciences, its EPS declined by 1.4% annually over the last five years while its revenue grew by 1.2%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.
We can take a deeper look into Integra LifeSciences’s earnings to better understand the drivers of its performance. As we mentioned earlier, Integra LifeSciences’s operating margin declined by 6.8 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
In Q4, Integra LifeSciences reported EPS at $0.97, up from $0.89 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Integra LifeSciences’s full-year EPS of $2.56 to shrink by 2.4%.
Key Takeaways from Integra LifeSciences’s Q4 Results
We enjoyed seeing Integra LifeSciences beat analysts’ EPS and EBITDA expectations this quarter. On the other hand, its full-year revenue and EPS guidance fell short of Wall Street’s estimates, making this a softer quarter. The stock traded down 2.4% to $21.51 immediately after reporting.
Integra LifeSciences didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free .