Morningstar | First-Quarter Results Put Teleflex on Track to Meet Our 2019 Projections
Teleflex's first-quarter results were consistent with our expectations on an underlying basis, but reported numbers fell slightly short due to stronger currency headwinds than we anticipated. Nevertheless, it appears the firm is well on its way to meeting our forecasts for the full year, and we'll likely raise our $196 per share fair value estimate for this no-moat name by a mid-single-digit percentage to account for the cash flows received since our last update.The firm posted constant currency revenue growth of 7.6%, ahead of initial guidance that called for 6%-7% for the full year. Strength was broad based across geographies and product segments, with new products in the firm's interventional portfolios continuing to outpace its core business. NeoTract, in particular, continues to impress with revenue growth over 40% in the quarter, on pace to beat our 30% estimate for the full year. Restructuring charges also came in ahead of our model, due to the quick ramp-up of costs associated with management's 2019 footprint realignment plan.
With the year off to a good start, we wouldn't be surprised to see Teleflex return to more sizable dealmaking later this year. Net leverage has declined to roughly 2.8 times adjusted EBITDA, and we anticipate this metric will fall nearer to 2.3 times by the end of 2019. The balance sheet looks much improved following the success of the Neotract and Vascular Solutions integrations, leaving management with over $1 billion in dry powder available without having to go much above the high end of Teleflex's historical leverage range. The firm's updated credit agreement carries a 4.5 times net leverage covenant, but we'd be surprised to see debt levels rise to that level for a sustained period of time.
Teleflex is a provider of medical technology products. The company primarily designs, develops, manufactures and supplies single-use medical devices used by hospitals and healthcare providers for common diagnostic and therapeutic procedures in critical care and surgical applications. The company's product categories within its geographic segments include vascular access, which provides devices that facilitate a variety of critical care therapies and other applications; anesthesia, which comprised of airway and pain management product lines; and interventional, which consist of a variety of coronary catheters, structural heart therapies, and peripheral intervention products.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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