Integer Can Drive Consolidation Of Medical Device Outsourcing, Bullish Analyst Projects

Truist Securities initiated coverage on Integer Holdings Corporation ITGR, noting the company as one of the largest med device outsource manufacturers and a unique SMID MedTech asset.

The analyst notes Integer’s profitability and leveraged EPS growth prospects (1.5-2x that of revenue), which can sustain a high-teens 2023-2026 EPS CAGR.

Integer has increasing exposure (through the OEM supply chain) to growth segments & emerging product cycles across the MedTech sector, Truist writes.

Also, a durable inorganic (tuck-in) strategy can add at least 1-2%+ on top of a high-single-digit organic top-line, the analyst adds.

Related: Medical Device Manufacture Integer To Gain From Expanding Pulsed Field Ablation Market, Earns Upgrade From BofA.

Truist initiates with a Buy rating and a price target of $137.

Integer has an 18 to 20 percent share in its served markets, which total about $9 billion. The trend is toward increased manufacturer outsourcing as the industry seeks to reduce costs and add redundancy.

Truist notes that the “med device outsourcing sector is ripe for a player like Integer to drive consolidation as it leverages its growing scale within a highly fragmented market.”

Truist projects Integer to achieve 8-9% organic revenue growth, surpassing its weighted average market growth rate of 4%-6%, driven by the company’s strategic shift towards faster-growing markets, increased market share, and advantages of scale in a consolidating med device outsourcing industry. 

Additionally, with an annual M&A budget of $250-300 million, the analyst expects an additional 200 basis points of growth per year.

In April, Integer reported first-quarter adjusted EPS of $1.14, beating the consensus of $1.11. Sales were $414.81 million, up 10% (organic growth of 6%), beating the consensus of $412.83 million.

Price Action: ITGR shares are up 4.76% at $117.34 at last check Wednesday.

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