Is it Wise to Hold Teleflex Stock in Your Portfolio Now?

Teleflex TFX is slated for expansion in the coming quarters, owing to the key growth drivers in the Interventional business. The company's market dominance in Central Venous Catheters and midlines categories is poised to continue, aiming to further increase market share by introducing new products. In addition, the sound solvency position is encouraging. Meanwhile, the impact of macroeconomic challenges on the company's operations remains a concern. Competitive pressures may hinder Teleflex's growth.

In the past year, this Zacks Rank #3 (Hold) stock has declined 11.8% against the 3.4% growth of the industry and the 25.3% rise of the S&P 500 composite.

The global provider of medical technologies has a market capitalization of $9.42 billion. TFX surpassed estimates in each of the trailing four quarters, delivering an average earnings surprise of 6.5%. 

Let's delve deeper.

Tailwinds

Strong Surge in the Interventional Segment: The Interventional product category, consisting of a range of applications to diagnose and administer treatment for coronary and peripheral vascular disease, generated 15.4% revenue growth in the first quarter of 2024. This was led by key offerings such as balloon pumps, MANTA, and complex catheters.

Last year, Teleflex expanded the Structural Heart portfolio with the FDA-cleared Wattson Temporary Pacing Guidewire, which is designed specifically for use during transcatheter aortic valve replacement and balloon aortic valvuloplasty procedures.

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The company anticipates launching the Ringer Catheter in the back half of 2024, subject to receiving the FDA marketing clearance. Initially, it will be introduced with a PTCA indication with plans for potential label expansion after the completion of the vessel perforation trial.

Vascular Business Grows: In the long term, Teleflex is positioned for dependable growth with category leadership in Central Venous Catheters and midlines and expects to capture more shares with novel coated PICC (Peripherally Inserted Central Catheters) portfolio and new product launches. In the first quarter, Vascular revenues witnessed a modest increase, led by the underlying growth in the PICCs, Central Access and EZ-IO Intraosseous Vascular Access system.

Despite setbacks from the Endurance catheter recall, the company expects a significant business improvement by the third quarter. Teleflex's Arrow EZ-IO (Intraosseous) Needle received FDA 510(k) clearance for MR Conditional labeling last year, allowing clinicians to seamlessly care for patients who require MRI scans without interruption to the established site for vascular access.

Strong Solvency with High Leverage: Teleflex closed the first quarter of 2024 with cash and cash equivalents of $237 million and near-term payables of $91 million, reflecting robust financial stability.

Long-term debt decreased to $1.67 billion from $1.73 billion in the fourth quarter of 2023.  Debt-to-capital ratio decreased sequentially by 0.9% to 28.1%.

Downsides

Navigating the Macroeconomic Challenges: Teleflex has been tackling elevated levels of overall cost inflation, specifically within materials and services. In 2024 as well, deteriorating international trade stemming from complex geopolitical environments across the globe is leading to cost inflation. The company also faces higher interest rates and volatile exchange rates, driven by the monetary policy decisions of central banks.

In the first quarter, Teleflex's gross margin improvements were partially offset by the continued cost inflation. SG&A expenses rose 4.4% from the 2023 comparable figure, mainly due to higher operating expenses from the acquired Palette business, increased legal expenses, and IT-related costs.

Competitive Landscape Tough: Teleflex faces competition from a wide range of companies, from small start-up enterprises to larger and more established ones that have access to significantly greater financial resources. The market is characterized by extensive product research and development and fast-paced technological advances, where the company competes on clinical superiority, innovative product features and cost-effectiveness. Hence, the inability to successfully navigate the fiercely competitive environment may hurt Teleflex's market standing and growth prospects.

Estimate Trend

The Zacks Consensus Estimate for TFX's 2024 earnings per share has remained constant at $13.74 in the past 30 days.

The Zacks Consensus Estimate for the company's 2024 revenues is pegged at $3.09 billion. This suggests a 3.8% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Hims & Hers Health, Medpace and ResMed.

Hims & Hers Health's earnings are expected to surge 272.7% in 2024 compared with the industry's 16.6%. HIMS' earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 79.2%. Its shares have surged 136.4% against the industry's 28% decline in the past year.

HIMS sports a Zacks Rank #1 (Strong Buy) at present.

Medpace, carrying a Zacks Rank #2 (Buy) at present, has an estimated 2024 earnings growth rate of 27.1% compared with the industry's 12.7%. Shares of MEDP have rallied 85.2% compared with the industry's 5.1% growth over the past year.

MEDP's earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.8%. In the last reported quarter, it delivered an earnings surprise of 30.6%.

ResMed, also carrying a Zacks Rank #2 at present, has an estimated fiscal 2024 earnings growth rate of 19.6% compared with the industry's 13.4%. Shares of RMD have dropped 10.8% compared with the industry's 2% decline over the past year.

RMD's earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 2.8%. In the last reported quarter, it delivered an earnings surprise of 10.9%.

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