Here's Why Teleflex Has Been Losing Ground Since Q4 Earnings

Teleflex Incorporated’s (NYSE:TFX) shares lost 7.6% to close at $250.51 after it announced earnings results on Mar 5. The company reported adjusted earnings per share of $2.44 in fourth-quarter 2017, beating the Zacks Consensus Estimate of $2.40. Earnings improved 14.6% from the year-ago figure of $2.13.

Revenues in Detail

Adjusted revenues in the fourth quarter increased 15.8% year over year to $595.1 million (12.6% at constant exchange rate or CER) but missed the Zacks Consensus Estimate of $602 million owing to some temporary softness.

On a segmental basis, Vascular North America revenues increased 0.5% (0.3% at CER) year over year in the fourth quarter to $80.7 million.

Teleflex Incorporated Price, Consensus and EPS Surprise

Teleflex Incorporated Price, Consensus and EPS Surprise | Teleflex Incorporated Quote

Interventional North America revenues increased 177.6% in the fourth quarter from the year-ago quarter (177.2% at CER) to $61.7 million.

Anesthesia North America revenues were down 9.2% from the year-ago quarter (down 9.4% at CER) to $49.9 million.

Surgical North America revenues in the fourth quarter were down 9.4% from the year-ago quarter (9.8% at CER) to $43.7 million.

EMEA revenues increased 5.8% from the year-ago quarter but fell 2% at CER to $143.6 million. Asia revenues rose 8% in the quarter from the year-ago quarter (4.5% at CER) to $78.8 million. OEM revenues climbed 1.3% from the year-ago quarter but declined 0.1% at CER to $46 million.

All other revenues increased 67% (67.6% at CER) to $90.7 million in the quarter under review.

Operational Update

Teleflex's gross profit during the reported quarter increased 21.1% year-over-year to $330.7 million. Gross margin expanded 245 basis points (bps) to 55.6%.

SG&A expenses in the fourth quarter rose 47.9% year over year to $213.3 million. Research and development expenses rose 62.4% year over year to $25.5 million. Operating expenses totaled $238.8 million in the fourth quarter, up 49.3% year over year.

Adjusted operating margin in the quarter was 15.5%, down 657 bps from the year-ago quarter.

Financial Update

Teleflex exited 2017 with cash and cash equivalents of $333.6 million, compared with $543.8 million at the end of 2016.

2017 at a Glance

Full-year adjusted earnings came in at $8.40 compared with the year-ago figure of $7.34, reflecting an increase of 14.4%.

Full-year adjusted revenues came in at $2146.3 million, up 14.9% from the year-ago period.

2018 Guidance

For 2018, Teleflex expects adjusted revenues growth at CER in the band of 12-13%. The company also expects adjusted earnings per share in the band of $9.55-$9.75. The Zacks Consensus Estimate for full-year earnings per share is pegged at $9.68, within the company’s guided range. The Zacks Consensus Estimate for full-year revenues stands at $2.46 billion.

Our Take

Teleflex exitedfourth-quarter 2017 on a mixed note. We are encouraged to note that the company is working on product innovation through R&D. However, the contraction in operating margin is discouraging. Also, a tough competitive landscape acts as a dampener.

Zacks Rank & Key Picks

Teleflex has a Zacks Rank #3 (Hold).

A few better-ranked stocks that reported solid results this earnings season are PetMed Express (NASDAQ:PETS) , PerkinElmer (NYSE:PKI) and ResMed (NYSE:RMD) . While PetMed sports a Zacks Rank #1 (Strong Buy), PerkinElmer and ResMed carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed reported third-quarter fiscal 2018 results. Adjusted earnings per share were 44 cents, up 88.3% from the prior-year quarter. Revenues rose 13.7% on a year-over-year basis to $60.1 million.

PerkinElmer reported fourth-quarter 2017 adjusted earnings per share of 97 cents. Adjusted revenues were approximately $641.6 million, up from $567 million in the year-ago quarter.

ResMed posted second-quarter fiscal 2018 adjusted earnings per share of $1, up 36.9% from the prior-year quarter. Revenues in the reported quarter increased 13.4% year over year (up 11% at constant exchange rate or CER) to $601.3 million.

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