Teleflex (TFX) Banks on Urolift Growth Amid Rising Expenses

Teleflex Incorporated TFX has been witnessing a gradual rebound in revenues, driven by stable performance across its operating segments and geographies. Yet escalating operating expenses are putting pressure on the bottom line. The stock currently carries a Zacks Rank #3 (Hold).

Teleflex exited the third quarter of 2021 with better-than-expected results. The year-over-year growth in earnings and revenues looks impressive as well. The bottom line included an estimated favorable impact of approximately 13 cents per share from foreign exchange compared with the prior year. Geographically, the company’s performance was strong in the Americas, EMEA and Asia despite headwinds from the more lethal Delta variant. Strong performance in the Vascular Access, Interventional, Anesthesia, Surgical, Interventional Urology and OEM segments also contributed to top-line growth. Expansion of both margins is another upside. The raised EPS guidance for 2021 buoys optimism.

Despite reporting softer-than-expected revenues for the third quarter, the company noted that strong clinical results drove the preference for UroLift. Several studies on Urolift have demonstrated rapid symptom relief and recovery, no new sustained sexual dysfunction and durable results.

Teleflex Incorporated Price

Teleflex Incorporated Price

Teleflex Incorporated price | Teleflex Incorporated Quote

In September 2021, Teleflex launched two UroLift System products — the UroLift Advanced Tissue Control (ATC) System and the UroLift 2 System. The UroLift ATC System is based on the popular UroLift System and has an improved delivery device tip that makes treating BPH patients with a median lobe easier. The new UroLift 2 System marks an advancement from the UroLift System platform, with innovative design features such as a single ergonomic trigger.

In the third quarter, within Vascular Access, revenues increased 9.7% year over year and 8.5% at CER. This segment benefited from the treatment of COVID-19 patients as the coronavirus infection rate surged dramatically in the third quarter. The Peripherally Inserted Central Catheters (PICC) portfolio and Intraosseous experienced considerable growth in the quarter, registering 10% and 12% year-over-year growth, respectively.

On the flip side, a year-over-year decline in the company’s ”Other” product segment (consisting of the company’s respiratory products that were not included in the divestiture to Medline, manufacturing service agreement revenues and Urology Care products) in the third quarter of 2021 is concerning.

Escalating operating expenses are building pressure on the bottom line. Teleflex’s research and development expenses rose 8.9% in the third quarter. This may continue through the year as the company is on track with investments in research and development in order to accelerate growth from new products between 2019 and 2021. Selling, general and administrative expenses rose 19.5% in the quarter.

Further, the ongoing coronavirus pandemic is wreaking havoc on the economy as a whole, with Teleflex facing the impact since the second half of March 2020. The year-over-year increase in revenues in the third quarter of 2021 was offset by the impact of COVID-19 and the divestiture of the respiratory assets to Medline.

In addition, stiff competition and foreign exchange woes persist. Further, a lowered full-year 2021 revenue guidance on reduced UroLift gains does not bode well.

Key Picks

A few better-ranked stocks from the broader medical space are Chemed Corporation CHE, Laboratory Corporation of America Holdings, or LabCorp LH and Medpace Holdings, Inc. MEDP.

Chemed has a long-term earnings growth rate of 7.7%. The company surpassed earnings estimates in three of the trailing four quarters and missed in one, delivering a surprise of 5.6%, on average. It currently carries a Zacks Rank #2 (Buy).

Chemed has outperformed its industry over the past year. CHE has gained 3.7% against a 35.6% industry decline.

LabCorp reported third-quarter 2021 adjusted earnings per share (EPS) of $6.82, which surpassed the Zacks Consensus Estimate by 42.9%. Revenues of $4.06 billion outpaced the Zacks Consensus Estimate by 13.4%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LabCorp has an estimated long-term growth rate of 10.6%. LH surpassed estimates in the trailing four quarters, the average surprise being 25.7%.

Medpace reported third-quarter 2021 adjusted EPS of $1.29, surpassing the Zacks Consensus Estimate by 20.6%. Revenues of $295.57 million beat the Zacks Consensus Estimate by 1.2%. It currently carries a Zacks Rank #1.

Medpace has an estimated long-term growth rate of 16.4%. MEDP surpassed estimates in the trailing four quarters, the average surprise being 11.9%.

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