Citi downgrades Integra LifeSciences stock amid compliance and revenue concerns
On Tuesday, Integra LifeSciences Holdings Corporation (NASDAQ:IART) stock received a downgrade in its rating by a Citi analyst from ‘Neutral’ to ‘Sell’. The firm also saw its price target reduced to $23.00 from the previous $30.00.
The downgrade comes despite Integra LifeSciences reporting a better-than-expected quarter with revenues of $418.2 million, which is a 2.3% organic increase and slightly above the consensus of $413.1 million. Earnings per share (EPS) were also marginally higher than expected at $0.63.
The analyst cited the implementation of a Compliance Master Plan, which includes a shipping hold on certain products, as the primary reason for the downgrade. Following this plan, Integra’s management has revised its 2024 revenue forecast to between $1.609 billion and $1.629 billion, which represents a decrease from the previously projected range of $1.672 billion to $1.687 billion. The EPS guidance was also lowered to the range of $2.41 to $2.57, down from the earlier estimate of $3.01 to $3.11.
The recent guidance adjustment is part of a series of downward revisions that began last year. However, the company has taken steps to address quality concerns by forming a Quality Committee at the Board level and is making progress in the search for a new CEO, with an appointment expected by the end of the year or sooner. Additionally, Integra is in the process of consolidating manufacturing operations at a new facility, which is seen as a reset for certain manufacturing processes.
Despite the current challenges, the company’s management has set expectations for 2025 EPS to be flat or show a modest year-over-year increase. This outlook is set against the backdrop of ongoing efforts towards resolving manufacturing issues and implementing the Compliance Master Plan.
In other recent news, Integra LifeSciences has been the focus of several analyst revisions. BTIG downgraded Integra LifeSciences from Neutral to Sell, following its Q2 2024 results which showed a revenue of $418.2 million, a 9.7% increase, and an adjusted EPS of $0.63. Despite surpassing the consensus revenue estimate, the company faces ongoing manufacturing and quality control issues leading to a downward revision of its full-year 2024 guidance.
Truist Securities, maintaining a Hold rating, raised their price target for Integra LifeSciences to $32 from $25, despite execution missteps noted by the company. Meanwhile, Citi reaffirmed its Neutral rating on the company, following the decision to relocate production of PriMatrix and SurgiMend to a new facility in Braintree, Massachusetts, expected to be operational in the first half of 2026.
On another note, Wells Fargo downgraded Integra LifeSciences from “Overweight” to “Equal Weight” and reduced the price target to $25 due to operational challenges at the Boston facility.
The company reported a slight decline in organic revenues by 2.5% year-over-year to $369 million in the first quarter of 2024. Despite the dip in revenues, the company’s Codman Specialty Surgical business experienced a 4.1% growth. These are some of the recent developments shaping the narrative around Integra LifeSciences.
InvestingPro Insights
Following the recent downgrade by a Citi analyst, Integra LifeSciences Holdings Corporation (NASDAQ:IART) presents a mixed picture, with some positive indicators amid the challenges. According to InvestingPro data, the company’s market capitalization stands at $2 billion, and it trades at a high earnings multiple with a current P/E ratio of 103.89. However, looking ahead, the adjusted P/E ratio for the last twelve months as of Q2 2024 drops to a more reasonable 16.83, suggesting improved earnings expectations. The company has also experienced revenue growth, with a 9.68% increase in the most recent quarter of 2024, indicating potential for recovery.
InvestingPro Tips highlight that management’s aggressive share buybacks and the expectation of net income growth this year could be signs of confidence in the company’s strategic direction. With the stock currently in oversold territory according to the RSI, and analysts predicting profitability for the year, there may be opportunities for investors looking at the long-term potential of Integra LifeSciences. It’s noteworthy that despite not paying a dividend, the company has been profitable over the last twelve months.
For those interested in exploring these dynamics further, InvestingPro offers additional insights and tips. There are 6 more InvestingPro Tips available for Integra LifeSciences, which can be accessed through the platform. To gain a deeper understanding of IART’s financial health and potential investment opportunities, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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