Integra LifeSciences Banks On CSS Segment, Competition Rife

On Mar 3, we issued an updated research report on Integra LifeSciences Holdings Corporation (NASDAQ:IART) . The stock carries a Zacks Rank #3 (Hold).Integra LifeSciences exited the fourth quarter of 2017 on a solid note. The strong year-over-year increase in revenues on the back of the company’s recently acquired business — Johnson & Johnson (NYSE:JNJ) Codman Neurosurgery business and Derma Sciences —buoys optimism. However, a tough competitive landscape adds to the company’s woes.

Over the past year, Integra LifeSciences has outperformed the industry. The stock has gained 25.9%, compared with 2.7% decline of the industry.

Coming to the quarterly results, Integra LifeSciences saw 2.3% organic growth in the Codman Specialty Surgical (CSS) segment in fourth-quarter. Reported revenues in the quarter grew 46.2% on the back of revenues from Codman Neurosurgery. This can be attributed to the sequential double-digit growth registered by Tissue ablation business owing to strong capital sales of the newly-launched CUSA Clarity. This apart, Dural Repair business performed well with 5% year-over-year organic growth on strength in DuraGen and DuraSeal product lines.

We are also encouraged to note that the segments saw year-over-year revenue growth in the period. Nonetheless, we believe the company is trying to execute its growth plan through an efficient management team. Moreover, the rise in year-over-year investments in research and development is encouraging. Also, the company’s promising guidance instills investor confidence in the stock.

However, Integra LifeSciences faces intense competition in the surgical implants and medical instruments market. The company needs to be innovative on the product front to fend off competition. Moreover, consolidation in the industry could lead to intense pricing pressure.

Also, significant margin contractions caused by escalating costs and expenses raise concerns.Further, the company generates significant revenues from the international business, which increases its vulnerability to adverse currency movements.

Key Picks

A few better-ranked stocks in the broader medical sector are PerkinElmer (NYSE:PKI) , Bio-Rad Laboratories (NYSE:BIO) and athenahealth, Inc. (NASDAQ:ATHN) .

Bio-Rad Laboratories sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 20%.

PerkinElmer has a long-term expected earnings growth rate of 12.3%. The stock carries a Zacks Rank #2.

athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.

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