Teleflex Raised to Buy - Analyst Blog

On Mar 25, Zacks Investment Research upgraded Teleflex Incorporated TFX to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

Teleflex has been witnessing rising estimate revisions over the past 60 days with two upward estimate revisions and no downward revision for 2014. The upward estimate revisions led to a 0.5% rise in Zacks Consensus Estimate to $5.52 per share for the year over the same time frame. Moreover, the company delivered positive earnings surprises in all of the last four quarters with an average beat of 8.6%.

This leading global provider of medical devices for critical care and surgery reported impressive fourth-quarter 2013 results and a promising 2014 guidance on Feb 21, 2014, subsequent to which its shares adopted an upward trend. Shares of Teleflex also hit a new 52-week high of $106.22 in mid-day trading on Mar 21.

Teleflex recently announced receiving the 510(k) clearance from the U.S. Food and Drug Administration (FDA) for its restated Indications for Use of the EZ-IO Vascular Access System. The Vascular Access System has been developed by Vidacare Corporation, acquired by Teleflex in December last year.

For the fourth quarter of 2013, Teleflex posted adjusted earnings of $1.36 per share (up 18.6% year over year) which comfortably beat the Zacks Consensus Estimate of $1.27. Net revenue grew 7.5% to $450.5 million, exceeding the Zacks Consensus Estimate of $436 million.

Teleflex is using mergers & acquisitions (M&A) to build out a diverse critical care business. The acquisitions of LMA International in Oct 2012 and Vidacare Corporation in Dec 2013 made significant contributions to revenue growth in the fourth quarter.

Furthermore, Teleflex reported a 50 basis points improvement in its fourth quarter operating margin of 7.8% due to management's focus on operating cost improvement.

For 2014, Teleflex provided revenue growth estimate in the range of 6–8% and adjusted earnings per share guidance in the range of $5.35–$5.55. The current Zacks Consensus Estimate of $5.49 lies within the guided range.

An encouraging guidance, increased M&A activity and stronger operating leverage represent a potential upside for Teleflex going forward.

Other Stocks to Consider

Some other stocks worth reckoning in the medical instruments industry are Cynosure, Inc. CYNO, Syneron Medical Ltd. ELOS and Delcath Systems, Inc. DCTH. All the three stocks carry a Zacks Rank #1 (Strong Buy).