Truist Securities has adjusted its outlook on Integer Holdings Corporation (NYSE: NYSE:ITGR), a medical device outsource manufacturer, by increasing its price target to $145 from the previous $137.
The firm maintains a Buy rating on the stock. This adjustment follows Integer's recent announcement that it has reached a deal to sell its Electrochem franchise for $50 million.
The sale, expected to close in October, will transform Integer into a pure-play entity focused solely on supplying and manufacturing for the medical technology industry. According to Truist Securities, this move aligns with Integer's strategy of managing its portfolio to shift towards areas with higher growth and profitability.
The analyst from Truist Securities believes that Integer Holdings presents a unique investment opportunity as a profitable small to mid-size company (SMID) with a consistent growth and margin profile. The decision to sell Electrochem is seen as a positive step that will likely enhance Integer's growth and margin prospects.
Furthermore, the anticipated growth and margin improvement following the sale are considered to justify a higher valuation multiple. The new price target of $145 is based on a 24 times multiple of Integer's estimated earnings per share for the year 2025.
In other recent news, Ultralife Corporation has announced a definitive agreement to acquire all outstanding shares of Electrochem Solutions from Integer Holdings Corporation for $50 million.
The acquisition, which includes Electrochem's ISO certified technology and manufacturing facility, is expected to be completed by the end of October. Electrochem reported revenues of $34 million for the twelve-month period ending June 30, 2024, and Ultralife anticipates that the acquisition will be accretive to its earnings per share in 2025.
In other developments, Integer Holdings Corporation reported second-quarter sales of $436 million, a 9.0% year-over-year increase. Despite earnings per share for the quarter coming in at $0.88, falling short of both Oppenheimer's and consensus estimates, the company reiterated its full-year 2024 revenue guidance, projecting between $1,735 million and $1,770 million.
Oppenheimer maintained its Outperform rating on Integer Holdings, highlighting the company's diversified risk-reward profile, unique core competencies, and improving financial statement. The company also revealed a robust growth projection for 2024 during its second-quarter earnings call, expecting an 18% growth in adjusted operating income on a 10% increase in sales.
Lastly, during Integer Holdings' second-quarter earnings call, the company reported a 9% increase in sales and a 20% increase in adjusted operating income for Q2 2024. They also raised their full-year profit outlook, expecting an 18% growth in adjusted operating income on a 10% increase in sales. Free cash flow is projected to be between $85 million and $105 million for 2024, while net total debt is expected to increase by $60 million to $80 million by the end of 2024.
InvestingPro Insights
Integer Holdings Corporation's (NYSE:ITGR) strategic move to focus on the medical technology industry aligns well with its current financial performance. According to InvestingPro data, the company has shown strong revenue growth of 11.71% over the last twelve months as of Q2 2024, with quarterly revenue growth of 9.04% in Q2 2024. This growth trajectory supports Truist Securities' optimistic outlook on the company's future performance.
InvestingPro Tips highlight that Integer is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.92. This suggests that the stock may be undervalued considering its growth prospects, which could be further enhanced by the company's strategic divestment of Electrochem.
Additionally, Integer's stock has demonstrated a high return over the last year, with a one-year price total return of 60.53%. This performance, coupled with the fact that the stock is trading near its 52-week high (97.13% of the 52-week high price), indicates strong market confidence in the company's direction.
For investors seeking more comprehensive analysis, InvestingPro offers 10 additional tips for Integer Holdings, providing a deeper understanding of the company's financial health and market position.
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