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Integer Holdings (ITGR) Gains 21.9% YTD: What's Driving the Stock?

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Integer Holdings (ITGR - Free Report) witnessed strong momentum year to date. Shares of the company have gained 21.9% compared with 5.4% growth of the industryin the same time frame. The S&P 500 Composite has risen 14.3% during the same period.

With healthy fundamentals and strong growth opportunities, this Zacks Rank #3 (Hold) company appears to be a solid wealth creator for its investors at the moment.

Plano, TX-based Integer Holdings manufactures and develops medical devices and components primarily for original equipment manufacturers.

Integer Holdings operates through two segments — Medical Sales and Non-Medical Sales. Medical Sales has three sub-segments — Advanced Surgical, Orthopedics and Portable Medical (AS&O); Cardio and Vascular (C&V); and Cardiac Rhythm Management & Neuromodulation (CRM&N).

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Catalysts Driving Growth

Integer Holdings is witnessing an upward trend in its stock price, prompted by its execution of manufacturing excellence initiatives, an improved supply chain, and a direct labor environment. The optimism led by a solid second-quarter 2024 performance and its strength in Medical sales are expected to contribute further.

Investors seemed to be optimistic about Integer Holdings’ stable footing in the cardiac, neuromodulation, orthopedics, vascular and advanced surgical markets. Its primary customers include large, multi-national original equipment manufacturers and their affiliated subsidiaries.

Per the management, Cardiac Rhythm Management (CRM) and Neuromodulations trailing four-quarter sales have increased 12% year over year, primarily driven by double-digit CRM growth from strong customer demand and double-digit neuromodulation growth from emerging PMA customers. The Cardio and Vascular product line sales in the last four quarters increased 18% year over year. The uptick is driven by strong customer demand and sales from the InNeuroCo and Pulse acquisitions.

Integer Holdings exited the second quarter of 2024 with better-than-expected results. The strong year-over-year top-line and bottom-line performances were impressive. Robust performances by the Medical segment and strength in all the product lines of the Medical segment were encouraging. These factors must have aided in surging the stock’s price.

Integer Holdings generated a gross profit of $119.4 million in the second quarter, up 12.8% year over year. The gross margin in the second quarter expanded 92 basis points (bps) to 27.4%. Adjusted operating profit totaled $56.2 million in the second quarter, reflecting a 30.3% uptick from the prior-year quarter. Adjusted operating margin in the second quarter expanded 211 bps to 12.9%. The expansion of both margins bodes well for the stock and has contributed to raising the price of the stock.

Risk Factors

Integer Holdings’ business depends on a continuous supply of raw materials. The supply and price of raw materials may be susceptible to fluctuations due to transportation issues, government regulations and price controls, among others. Significant increases in the cost of raw materials, which cannot be recovered through increases in the prices of the company’s products, could affect its operating results.

A Look at Estimates

Integer Holdings’earnings per share (EPS) in 2024 and 2025 are expected to grow 13.7% and 14.3% to $5.31 and $6.07 on a year-over-year basis, respectively. The Zacks Consensus Estimate for 2024 EPS has increased 4 cents and remained unchanged for 2025 in the past 30 days.

Revenues for 2024 and 2025 are anticipated to rise 9.6% and 7.6% to $1.75 billion and $1.88 billion, respectively, on a year-over-year basis.         

Stocks to Consider

Some better-ranked stocks in the broader medical space are Universal Health Service (UHS - Free Report) , Quest Diagnostics (DGX - Free Report) and ABM Industries (ABM - Free Report) . While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.

Universal Health Service has gained 41.1% compared with the industry's 34.8% rise so far this year.

Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.

Quest Diagnostics shares have gained 3.7% so far this year compared with the industry’s 10.2% rise.

ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.

ABM's shares have risen 24.1% so far this year compared with the industry’s 11.9% growth.

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