A Member of Pat McKeough’s Inner Circle recently asked for his advice on Teleflex - a medical technology company that specializes in the bloodstream/vascular and surgical areas of the industry.
Pat likes the company’s strong balance sheet and shareholder-friendly stock buyback program. The firm continues to report rising revenues from a diverse product portfolio. However, he notes that growth has been slow and the firm’s shares have consistently underperformed the S&P500.
Teleflex Inc. (Symbol TFX on New York; www.teleflex.com) is a global provider of medical technologies. Its apparatuses and other devices focus on several specialty areas, including vascular access, interventional cardiology and radiology, anaesthesia, emergency medicine, plus surgical, urologic and respiratory care. The company’s brands include Arrow, Deknatel, LMA, Pilling, QuikClot, Rusch, UroLift and Weck.
On July 26, 2023, Teleflex acquired Palette Life Sciences for $600 million in upfront cash and an additional $50 million upon reaching certain milestones.
The acquisition strengthens the company’s Interventional Urology portfolio. Palette’s principal product is Barrigel, a biodegradable sculptable rectal spacer. It’s expected to generate annual revenue of $56 million in 2023. (Used in radiotherapy, a rectal spacer pushes the rectum away from the prostate, and therefore away from high radiation doses. This can help reduce potential side effects.)
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Teleflex’s revenue rose 6.0% from $2.45 billion in 2018 to $2.60 billion in 2019. Revenue then fell by 2.2% in 2020—as the pandemic disrupted medical procedures—to $2.54 billion. In 2021, revenue rebounded by 10.7%, to $2.81 billion. In 2022, revenue fell by 0.7%, to $2.79 billion. That decline was due to supply-chain constraints. The high U.S. dollar also hurt the contribution of Teleflex’s foreign sales.
The company’s earnings rose 12.6% from $9.90 a share in 2018 to $11.15 a share in 2019. Earnings then fell by 4.3% in 2020—along with slower revenue due to the pandemic—to $10.67 a share. In 2021, earnings rebounded by 24.9%, to $13.33 a share. In 2022, earnings fell along with revenue, by 2.0% to $13.06 a share.
Inner Circle: Teleflex announces share buybacks off a strong balance sheet
In the three months ended June 30, 2024, Teleflex’s revenue rose 0.9%, to $749.7 million from $743.3 million a year earlier. Excluding one-time items, the company made $3.42 a share. That was up slightly from $3.41 the prior year.
Teleflex also announced a share repurchase authorization for up to $500 million of common stock, including an accelerated share repurchase program for $200 million.
The balance sheet is strong. Teleflex holds cash of $238.6 million, and its long-term debt of $1.6 billion is a low 13.9% of its market cap. The stock yields 0.6%.
The acquisition of Palette should be a good fit for Teleflex and adds to its growth prospects.
Recommendation in Pat’s Inner Circle: Teleflex Inc. is a hold.
