Teleflex Earnings: Strong Rebound as Expected; Continuation Depends on Procedures

No-moat Teleflex TFX posted strong first-quarter revenue growth across most product categories. Management did not change its adjusted EPS guidance. We believe there is plenty of room for further growth driven by the postpandemic rebound, even though some of the contingent factors, such as procedure volume and labor costs, are somewhat uncertain. We are maintaining our fair value estimate of $211 per share.

Revenue grew by 13.2% on a constant currency basis, though we estimate about a third of this growth was due to additional shipping days this quarter. On a regional basis, the Americas and EMEA regions posted solid growth driven by an increase in procedure volumes. This driver was pronounced in China following the end of the zero-COVID policy, which brought growth in Asia to 22.8%. From the perspective of the product portfolio, there was broad-based growth across most categories. The exception was interventional urology, which is more sensitive to the current constraints on office visits caused by staffing shortages. Supply chain issues eased somewhat year over year, and adjusted gross margins improved by 100 basis points. This was offset by increased headcount and cost of labor, so operating margin remained largely flat.

The firm’s strong performance is consistent with the rebounding device demand we’ve seen due to the resumption of healthcare utilization in the quarter. We think there is most likely a strong path for further growth in the near term given that improvements in the labor shortage at hospitals may open the door to increased utilization.