On Jul 3, 2014, we initiated coverage on Integra LifeSciences Holdings Corpopration ( IART ), a forerunner in regenerative medicine. Over the past several quarters, Integra has been witnessing weak revenues across its U.S. Spine and Others segment owing to continued pricing pressure and challenging market conditions. However, we are currently impressed with the strong momentum of its new and improved Neurosurgery product line post the acquisition of DuraSeal products from Covidien plc ( COV ), and expect this to boost growth in the coming period.
In the first quarter of 2014, Integra LifeSciences reported adjusted earnings per share of 57 cents, up a significant 83.8% but short of the Zacks Consensus Estimate by a penny. Total revenue increased 9.4% year over year beating the Zacks Consensus Estimate by a whisker. However, excluding DuraSeal revenues and certain other discontinued operations, the top line increased a mere 3%.
In addition, the bearish 2014 earnings outlook also fails to indicate any near-term catalyst that may improve the economic scenario in the near future. Although the company expects to see an improvement in the outlook for Spine Hardware with the introduction of new distributors and recently launched products, near-term visibility is still a matter of concern.
However, we are upbeat about the company's acquisition of the DuraSeal product lines from Covidien. According to Integra, the DuraSeal product line is a strategic fit for its Neurosurgery division and will add to its growth and profitability in 2014. In addition to its strategic value, DuraSeal will add scale and increase profitability without further complicating the company's structure. The reported quarter, being the first quarter post-closure of the DuraSeal acquisition, contributed a decent share to the company's neurosurgery business.
Integra currently carries a Zacks Rank #4 (Sell).
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