Morningstar | Teleflex's Full-Year 2018 Results and Initial 2019 Outlook Meet Our Expectations
No-moat Teleflex reported 2018 results that fell in line with our expectations and provided an initial 2019 outlook that largely brackets our estimates. We'll likely raise our $189 per share fair value estimate by a mid-single-digit percentage to account for the cash flows received since our last update, but we don’t intend to make many meaningful changes to our assumptions.Notably, the firm reported full-year organic constant-currency revenue growth of 5.1%, near the low end management's 5.0%-5.5% forecast as we had previously anticipated. This included outperformance from both NeoTract and Vascular Solutions versus our fourth-quarter estimates, suggesting underlying core growth likely remained muted. This explains the modest negative market reaction to the news, as forward guidance looks reasonably good. Management is anticipating 6%-7% constant-currency revenue growth, although the company will face a 100-basis-point headwind from currency over the course of the year versus the benefits seen in 2018. Earnings for 2019 fell in line with our projections while including modest incremental spending associated with getting the firm's UroLift product reimbursed in Japan following its earlier-than-expected approval and expanding sales support for the product globally. These investments limit the firm's ability to drive operating leverage over the coming year, but we contend that underlying performance continues to trend in line with management's long-term outlook.
Finally, the firm announced another restructuring plan that should help support our gross margin outlook for the enterprise over time. The company has been adept at improving its cost of goods over the years, even after controlling for the benefits attributable to acquiring higher-margin lines of business over the last few years. With the firm's leverage ratio set to fall below 3 times during 2019, we wouldn't be surprised to see management pursue another larger transaction over the medium term.
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.
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