Integra LifeSciences slides on Q4 sales miss

Integra LifeSciences (NSDQ:IART) met the consensus earnings forecast for its 4th-quarter earnings, but saw share prices slide nevertheless after it missed Wall Street’s top-line outlook last week.

The Plainsboro, N.J.-based medical device company posted profits of $28.2 million, or 35¢ per share, on sales of $255.7 million for the 3 months ended Dec. 31, for a whopping 88.6% bottom-line gain on sales growth of 6.0% compared with Q4 2015.

Adjusted to exclude 1-time items, earnings per share were 52¢, dead even with The Street, where analysts were looking for sales of $257.3 million.

For the full year, Integra swung from red to black ink, logging profits of $74.6 million, or 94¢ per share, on sales of $992.1 million, for sales growth of 12.4% compared with 2015. Adjusted EPS came in at $1.76.

“We were pleased with our performance in 2016, which resulted in full-year organic revenue growth of 9% and full-year adjusted gross margin of 69.5%,” president & CEO Peter Arduini said in prepared remarks. “We look forward to a transformative 2017 as we integrate 2 of the largest acquisitions in the company’s history.”

Integra last week closed its $200 million pickup of Derma Sciences, a week after floating a $1.05 billion cash offer for the bulk of Johnson & Johnson (NYSE:JNJ) unit Codman Neurosurgery.

Barclays analyst Matthew Taylor, in a note to investors last week, said that although the Integra management team has a strong record on integrating acquisitions, it’s never attempted any of the scale of the Derma and Codman deals.

“As a reminder, while IART has a track record of carve-out integrations, these were mostly small and [Codman] will be the largest acquisition in IART’s history, and follows the Derma Sciences acquisition announced on 1/10/17. To execute these 2 different integrations, IART has created 2 separate, dedicated integration teams for Derma Sciences and Codman, focused on minimizing disruptions to the ongoing business. In addition, it has assembled a group of external advisors with deep carve-out integration experience, giving added capacity to work on the integrations and run the base business. The team has already begun to establish a robust integration plan,” Taylor wrote. “While we are impressed with the management team and their M&A track record, we have some concern that the Derma and Codman acquisitions increase integration risk while diluting margins and growth.”

Including the Derma Sciences buy, Integra said it expects to report adjusted EPS of $1.88 to $1.94 on sales of $1.12 billion to $1.14 billion this year.

IART shares are off nearly -2% since the b. 23 earnings announcement. The stock was up slightly today in late-morning activity, trading at $42.42 per share for a 0.2% gain on the day.

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