A month has gone by since the last earnings report for Wright Medical Group N.V. . Shares have added about 8.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Wright Medical Posts Narrower-than-Expected Q4 Loss
Wright Medical reported adjusted loss of $0.06 per share in the fourth quarter of 2016, narrower than loss of $0.08 reported in the year-ago quarter and the Zacks Consensus Estimate of a loss of $0.11.
Net sales increased 15.7% year over year to $193 million and crushed the consensus estimate of $185 million.
Meanwhile, over the last four trailing quarters, the company posted positive earnings surprises, the average being 45.8%.
For full-year 2016, the company reported revenues of $690.3 million, up 70.3% on a year-over-year basis.
Highlights
The company’s flagship platforms – SIMPLICITI and ASCEND FLEX shoulder systems – recorded considerable growth and also hold promise going forward.
Notably, the INFINITY total ankle replacement system, AUGMENT Bone Graft and SALVATION limb salvage system (for treating Charcot foot) boosted Wright Medical’s trajectory in the fourth quarter.
The U.S. biologics business was again the fastest growing segment, growing 29% in the fourth quarter.
Quarter in Detail
Wright Medical currently reports revenues under one segment: Total Extremities & Biologics. Consolidated sales at the segment in the U.S. increased 15.7% from the year-ago quarter to almost $118 million.
Internationally, sales in the extremities and biologics business were up 15.8% year over year to $49.9 million, driven by strong growth in the Canadian and Australian markets.
Total Extremities & Biologics include four sub-segments, namely, Lower Extremities, Upper Extremities, Biologics and Sports Med & Other.
The U.S. lower extremities business sales increased 8.9% in the fourth quarter. However, the U.S. lower extremities business was affected by revenue dis-synergies of around 5% in the quarter.
Adjusted gross margin, as a percentage of revenues, is pegged at 77.6% for the quarter, a decrease of roughly 100 basis points (bps) on a year-over-year basis. Per management, this was primarily because of geographic mix.
Selling, general and administrative expenses accounted for 72.8% of total revenues in the fourth quarter, totaling $140.5 million, a contraction of 313 basis points (bps) from the year-ago quarter. This can be attributed to reduced cost structure and other cost synergies. Notably, expenses on Research and Development (R&D) decreased 6% year over year.
Guidance
Wright Medical projects net sales for full-year 2017 in the band of $755 million to $765 million, representing reported growth of 9% to 11%. This includes a negative impact from foreign currency exchange of approximately 2%. Notably, the midpoint of the net sales guidance represents constant currency growth of approximately 13%.
The company forecasts full-year 2017 adjusted EBITDA from continuing operations in the range of $78.5 million to $85.5 million.
Wright Medical anticipates a stage rollout of its BluePrint 3D Planning software by the first or second quarter of 2017.
Furthermore, the company is planning to launch line extensions for SALVATION Limb Salvage System by the second half of 2017.
Meanwhile, the rollouts of the INVISION Revision Ankle System and the ORTHOLOC 3Di Ankle Fracture System are on track and are expected to be unveiled by the third and fourth quarters of 2017, respectively.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been 12 downward revisions for the current quarter compared to two downward. In the past month, the consensus estimate also shifted downward by 66.7 % due to these changes.
VGM Scores
At this time, Wright Medical's stock has a poor Growth Score of 'F', a grade with the same score on the momentum front. Following the exact same course, the stock was allocated also a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Wright Medical (WMGI) Up 8.7% Since the Last Earnings Report?
A month has gone by since the last earnings report for Wright Medical Group N.V. . Shares have added about 8.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Wright Medical Posts Narrower-than-Expected Q4 Loss
Wright Medical reported adjusted loss of $0.06 per share in the fourth quarter of 2016, narrower than loss of $0.08 reported in the year-ago quarter and the Zacks Consensus Estimate of a loss of $0.11.
Net sales increased 15.7% year over year to $193 million and crushed the consensus estimate of $185 million.
Meanwhile, over the last four trailing quarters, the company posted positive earnings surprises, the average being 45.8%.
For full-year 2016, the company reported revenues of $690.3 million, up 70.3% on a year-over-year basis.
Highlights
The company’s flagship platforms – SIMPLICITI and ASCEND FLEX shoulder systems – recorded considerable growth and also hold promise going forward.
Notably, the INFINITY total ankle replacement system, AUGMENT Bone Graft and SALVATION limb salvage system (for treating Charcot foot) boosted Wright Medical’s trajectory in the fourth quarter.
The U.S. biologics business was again the fastest growing segment, growing 29% in the fourth quarter.
Quarter in Detail
Wright Medical currently reports revenues under one segment: Total Extremities & Biologics. Consolidated sales at the segment in the U.S. increased 15.7% from the year-ago quarter to almost $118 million.
Internationally, sales in the extremities and biologics business were up 15.8% year over year to $49.9 million, driven by strong growth in the Canadian and Australian markets.
Total Extremities & Biologics include four sub-segments, namely, Lower Extremities, Upper Extremities, Biologics and Sports Med & Other.
The U.S. lower extremities business sales increased 8.9% in the fourth quarter. However, the U.S. lower extremities business was affected by revenue dis-synergies of around 5% in the quarter.
Adjusted gross margin, as a percentage of revenues, is pegged at 77.6% for the quarter, a decrease of roughly 100 basis points (bps) on a year-over-year basis. Per management, this was primarily because of geographic mix.
Selling, general and administrative expenses accounted for 72.8% of total revenues in the fourth quarter, totaling $140.5 million, a contraction of 313 basis points (bps) from the year-ago quarter. This can be attributed to reduced cost structure and other cost synergies. Notably, expenses on Research and Development (R&D) decreased 6% year over year.
Guidance
Wright Medical projects net sales for full-year 2017 in the band of $755 million to $765 million, representing reported growth of 9% to 11%. This includes a negative impact from foreign currency exchange of approximately 2%. Notably, the midpoint of the net sales guidance represents constant currency growth of approximately 13%.
The company forecasts full-year 2017 adjusted EBITDA from continuing operations in the range of $78.5 million to $85.5 million.
Wright Medical anticipates a stage rollout of its BluePrint 3D Planning software by the first or second quarter of 2017.
Furthermore, the company is planning to launch line extensions for SALVATION Limb Salvage System by the second half of 2017.
Meanwhile, the rollouts of the INVISION Revision Ankle System and the ORTHOLOC 3Di Ankle Fracture System are on track and are expected to be unveiled by the third and fourth quarters of 2017, respectively.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been 12 downward revisions for the current quarter compared to two downward. In the past month, the consensus estimate also shifted downward by 66.7 % due to these changes.
Wright Medical Group N.V. Price and Consensus
Wright Medical Group N.V. Price and Consensus | Wright Medical Group N.V. Quote
VGM Scores
At this time, Wright Medical's stock has a poor Growth Score of 'F', a grade with the same score on the momentum front. Following the exact same course, the stock was allocated also a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.