Truist Securities initiated coverage on Integer Holdings Corporation (NYSE:ITGR), noting the company as one of the largest med device outsource manufacturers and a unique SMID MedTech asset.

The analyst notes Integer's profitability and leveraged EPS growth prospects (1.5-2x that of revenue), which can sustain a high-teens 2023-2026 EPS CAGR.

Integer has increasing exposure (through the OEM supply chain) to growth segments & emerging product cycles across the MedTech sector, Truist writes.

Also, a durable inorganic (tuck-in) strategy can add at least 1-2%+ on top of a high-single-digit organic top-line, the analyst adds.

Related: Medical Device Manufacture Integer To Gain From Expanding Pulsed Field Ablation Market, Earns Upgrade From BofA.

Truist initiates with a Buy rating and a price target of $137.

Integer has an 18 to 20 percent share in its served markets, which total about $9 billion. The trend is toward increased manufacturer outsourcing as the industry seeks to reduce costs and add redundancy.

Truist notes that the "med device outsourcing sector is ripe for a player like Integer to drive consolidation as it leverages its growing scale within a highly fragmented market."

Truist projects Integer to achieve 8-9% organic revenue growth, surpassing its weighted average market growth rate of 4%-6%, driven by the company's strategic shift towards faster-growing markets, increased market share, and advantages of scale in a consolidating med device outsourcing industry.

Additionally, with an annual M&A budget of $250-300 million, the analyst expects an additional 200 basis points of growth per year.

In April, Integer reported first-quarter adjusted EPS of $1.14, beating the consensus of $1.11. Sales were $414.81 million, up 10% (organic growth of 6%), beating the consensus of $412.83 million.

Price Action: ITGR shares are up 4.76% at $117.34 at last check Wednesday.

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