Teleflex (TFX) Down 36.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Teleflex (TFX). Shares have lost about 36.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Teleflex due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Teleflex Q4 Earnings and Revenues Beat Estimates

Teleflex’s adjusted earnings per share from continuing operations of $3.28 for the fourth quarter of 2019 were up 18.4% year over year. The bottom line also surpassed the Zacks Consensus Estimate by 2.2%.

GAAP earnings per share for the fourth quarter were $2.28, reflecting a rise of 21.9% from the year-ago period.

Adjusted earnings per share from continuing operations were $11.15 for the year, reflecting a 12.6% increase from the year-ago period. Moreover, the company surpassed the Zacks Consensus Estimate by 0.6%.

Revenues in Detail

Net revenues in the fourth quarter rose 6.1% year over year to $680.9 million and up 7.1% on a constant exchange rate or CER. The top line surpassed the Zacks Consensus Estimate by 0.3%.

Revenues for the year were $2.59 billion, reflecting a 6% increase from the year-ago period and 8.1% at CER. The metric was in line with the Zacks Consensus Estimate.

Segmental Revenues

In the fourth quarter, the Vascular Access segment reported net revenues of $154.6 million, up 3.7% year over year and 4.6% at CER. The company registered strong growth in PICC (Peripherally Inserted Central Catheters) and EZ-IO.

The Interventional business registered net revenues of $112.7 million, reflecting a 5.2% rise on a year-over-year basis and 6% at CER. The upside was backed by higher sales of complex catheters, biologics, OnControl and MANTA. However, the segment’s revenues were partially offset by the divestiture of the company’s catheter reprocessing product line.

In the Anesthesia segment, net revenues dipped 2.6% to $85.3 million on a year-over-year basis and 1.3% at CER, primarily driven by the reduction in the buying pattern of US-based distributors.

The Surgical segment recorded net revenues of $95.2 million, reflecting a 2.7% rise on a year-over-year basis and 3.9% at CER on increased sales of ligation clips.

Revenues at the Interventional Urology segment grew 54.3% on a year-over-year basis and 54.4% at CER.

Meanwhile, OEM recorded revenue growth of 3.6% on a year-over-year basis and 4.3% at CER.

The Other product segment (consisting of the company’s respiratory and urology care products) registered net revenues of $89.4 million, a dip of 5.6% year over year and 4.2% at CER. Despite a strong flu season, the decline was primarily caused by the shutdown of a facility of one of the company’s third-party sterilization providers in the quarter.

Margin

In the reported quarter, gross profit totaled $398.3 million. Gross margin expanded 147 basis points (bps) to 58.5% on an 8.9% rise in gross profit.

Selling, general and administrative expenses expanded 10.1% to $240.6 million in the quarter under review, while research and development expenses rose 11.9% to $31.1 million.

Overall adjusted operating profit was $126.5 million, up 5.9% year over year. However, adjusted operating margin saw a 4-bps contraction year over year to 18.6%.

Liquidity Position

Teleflex exited the year with cash and cash equivalents of $301.1 million, down from $357.2 million at the end of 2018.

Cumulative cash flow from operating activities from continuing operations was $437.1 million at the end of 2019 compared with $435.1 million at the end of 2018.

2020 Outlook

On a GAAP basis, the company projects revenue growth of 6.5-7.5%. At CER, revenue growth is estimated between 7.2% and 8.2%. The Zacks Consensus Estimate for revenues is pegged at $2.78 billion.

The company anticipates 2020 adjusted earnings per share from continuing operations of $12.50-$12.70. The Zacks Consensus Estimate for the same is pegged at $12.67.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -10.52% due to these changes.

VGM Scores

At this time, Teleflex has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Teleflex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.