A few things are almost given when Integra Lifesciences (Nasdaq: IART ) reports earnings. Revenue growth is going to be in the low teens and often a bit below some expectations, adjusted operating income growth is going to look pretty good, and you're going to hear about still more deals.
That was pretty much the case again for this increasingly diversified medical device and technology company. Sales were up 17% as reported and 14% organically, and adjusted operating income was up nearly 38%. Just as an aside, that "adjusted" number excludes costs pertaining to both stock-option expense and merger-and-acquisition activity. Given that M&A is such a consistent part of the business strategy, I'm not sure why we should just look beyond that, but I'll let other Fools decide for themselves.
As has been the case for a little while, products like dermal and nerve repair were big growers, and the company posted more sales to the likes of Medtronic (NYSE: MDT ) and Zimmer (NYSE: ZMH ) as well. The company also changed how it goes about reporting its revenue. Instead of reporting multiple lines like implants, instruments, monitoring, and so on, the company is now reporting in terms of neuro/ortho and medical/surgical. It's simpler, yes, but hopefully it's not a trend toward less information and disclosure.
On the new-acquisition front, the company bought Miltex for about $100 million in cash. Miltex sells various instruments to alternative non-hospital sites, and while Integra didn't pay a lot, it also won't be getting much in the way of growth from this deal.
For now, at least, the strategy of growing through conglomeration is still working, and the Street is still supportive. I'd be remiss, though, if I didn't point out that it carries more debt than most smaller med-techs, and these multi-acquisition roll-up stories just seem to have a way of going south eventually, no matter what the industry.
But for today, I can still give Integra the benefit of the doubt. It's not terribly expensive, and it does have a pretty good track record of both growth and improving returns on capital. I'd feel better if there were less of a fan club out there on this one, but so far, it has treated its fans quite well indeed.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).