Teleflex (TFX) Beats Q2 Earnings Estimates, Margins Contract

Teleflex Incorporated’s TFX adjusted earnings per share (EPS) from continuing operations of $1.93 for the second quarter of 2020 were down 27.4% year over year. The bottom line however surpassed the Zacks Consensus Estimate by 55.7%.

GAAP EPS for the second quarter was 24 cents, reflecting a massive plunge from the year-ago $1.77.

Revenues in Detail

Net revenues in the second quarter dropped 13.1% year over year to $567 million and 12% on a constant exchange rate or CER. The top line surpassed the Zacks Consensus Estimate by 6.5%.Per the company’s estimates, COVID-19 had a net negative impact on revenues of approximately $130 million or 20%.

Segmental Revenues

In the second quarter, the Vascular Access segment reported net revenues of $169.4 million, up 8.8% year over year at CER. The company registered strong growth within both central venous catheter and EZ-IO products.COVID-19 had a 5% positive impact on this segment’s sales in the second quarter.

Teleflex Incorporated Price, Consensus and EPS Surprise


Teleflex Incorporated Price, Consensus and EPS Surprise

Teleflex Incorporated price-consensus-eps-surprise-chart | Teleflex Incorporated Quote

The Interventional business registered net revenues of $82.6 million, down 20.3% on a year-over-year basis at CER. Revenues were largely dented by delay in the performance of certain non-emergent procedures because of COVID-19. There was a 24% COVID-19 related headwind in the quarter.

Within the Anesthesia segment, net revenues dropped 23% to $64.9 million, primarily owing to lower sales of laryngeal masks and regional anesthesia products.COVID-19 had an approximately 22% negative impact on this business in the quarter.

The Surgical segment recorded net revenues of $67.3 million, reflecting a 28.4% fall at CER due to lower sales of ligation portfolio and instruments. The company gauged a significant 30% headwind from COVID-19 on this business.

Revenues of $40.1 million in the Interventional Urology segment plummeted 40.9% on a year-over-year basis at CER. The cancellation of elective procedures impacted this product line more than any other segment of the company. Teleflex estimated an approximate $58 million COVID-19-related headwind in the second quarter on this business.

Meanwhile, OEM recorded revenue growth of $55.8 million, down 0.7%. While the company saw growth in April and May within this segment, it was offset by a 13% decline in sales in June.

The Other product segment (consisting of the company’s respiratory and urology care products) registered net revenues of $91.4 million, highlighting growth of 5.4% at CER. The growth was primarily supported by increased demand for respiratory products, such as filters and humidification, resulting from COVID-19.


In the reported quarter, gross profit totaled $278.3 million, down 20.9% year over year. Gross margin contracted 489 basis points (bps) to 49.1%.

Overall adjusted operating profit was $57.8 million, down 47% year over year. Adjusted operating margin saw a massive plunge of 653 bps year over year to 10.2%.

Liquidity Position

Teleflex exited the second quarter with cash and cash equivalents of $553.5 million, up from $406.5 million at the end of the first quarter.

Cumulative cash flow used in operating activities from continuing operations at the end of the second quarter was $134 million against net cash provided by operating activities of $157.3 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, this time too the company has not provided its 2020 outlook.

Our Take

Teleflex reported better-than-expected second-quarter results. However, on a year-over year basis, earnings and sales both declined significantly. Most of the segments registered revenue decline organically on a 20% aggregated negative impact from COVID-19. Margin debacle is another major concern.

On a positive note, underlying business, without considering the pandemic impact, however, grew approximately 8% at CER. Growth within the Americas was driven by strong sales of Vascular Access and respiratory products, both of which saw coronavirus-led elevated demand.

Zacks Rank and Stocks to Consider

Teleflex currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and PerkinElmer, Inc. PKI. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate of 91 cents. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%.

Thermo Fisher reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

PerkinElmer reported second-quarter 2020 adjusted EPS of $1.57, surpassing the Zacks Consensus Estimate by 68.8%. Revenues of $811.7 million outpaced the consensus mark by 1.3%.

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