On Monday, Needham reiterated its Hold rating on shares of medical device company Teleflex Incorporated (NYSE: NYSE:TFX), a $8.37 billion market cap company currently trading near its 52-week low, following reports of potential acquisition discussions.
According to InvestingPro data, the company maintains strong financials with $3.03 billion in revenue over the last twelve months and a healthy 56% gross margin.
Teleflex is currently in talks to purchase the vascular business of the private company Biotronik for an estimated €500 million to €1 billion, which is approximately $525 million to $1.05 billion. The news of these discussions was initially reported on December 4, 2024.
The vascular business of Biotronik includes a portfolio of stents, balloons, and guidewires that are used in peripheral and coronary procedures. According to Needham, this acquisition would align strategically with Teleflex's current Interventional business, as the products from Biotronik would complement its existing offerings.
The financial impact of the potential deal was also considered by Needham. If the Biotronik vascular business's financial performance is in line with that of its publicly traded counterparts, the acquisition could be slightly beneficial to Teleflex's organic revenue growth. Furthermore, it is expected to improve the company's gross margin and could modestly increase earnings per share (EPS), with an estimated 2-3% rise by 2026.
Despite the potential strategic fit and financial benefits of the acquisition, Needham prefers acquisitions that could more significantly enhance Teleflex's revenue growth. Consequently, the firm has decided to maintain its Hold rating on Teleflex stock. As of now, there is no certainty that the discussions between Teleflex and Biotronik will lead to an agreement.
InvestingPro analysis suggests the stock is currently undervalued, with a strong financial health score and liquid assets exceeding short-term obligations. Discover more insights and 8 additional ProTips with an InvestingPro subscription, including detailed analysis in the comprehensive Pro Research Report.
In other recent news, Teleflex Incorporated reported mixed third-quarter results. Despite a slight revenue miss, the company surpassed earnings expectations, reporting a 2.4% year-over-year increase in sales to $764.4 million and adjusted earnings per share of $3.49. However, the Original Equipment Manufacturer (OEM) sector underperformed, with revenues of $82.6 million falling short of the anticipated $89.3 million. The company also adjusted down its Interventional Urology growth expectations due to issues with its UroLift product.
In response to these developments, both CL King and Truist Securities revised their stock price targets for Teleflex. CL King adjusted its target to $274 from $277, while Truist Securities lowered its target to $227 from $255. Both firms maintained their respective Buy and Hold ratings on the stock.
Looking ahead, Teleflex has raised its earnings per share outlook to $13.90 to $14.20 and initiated a $500 million share repurchase program. The company is also exploring potential mergers and acquisitions as part of a disciplined capital allocation strategy.
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