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NuVasive (NUVA) Q1 Earnings Miss Estimates, Revenues In Line
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NuVasive, Inc. reported first-quarter 2018 adjusted earnings per share (EPS) of 39 cents, reflecting a 5.4% rise from the year-ago quarter. The figure, however, missed with the Zacks Consensus Estimate of 45 cents.
Solid contributions from the international business along with strong case volume growth in the U.S. Hardware businessled to the year-over-year improvement in earnings.
Including one-time items, the company reported first-quarter 2018 net loss of 53 cents per share against a net income of 22 cents per share a year ago. Rise in litigation liability of $29.0 million associated with the company's lawsuit with a former sales agent led to the net loss.
Revenues in the reported quarter came in at $260.5 million, up 4.6% (up 3.4% at constant exchange rate or CER) from the year-ago $249 million. The figure was on par with the Zacks Consensus Estimate.
In the reported quarter, revenues at the U.S. Spinal Hardware business increased around 1% led by rise in case volumes of roughly 5% along with contribution from product launches like XLIF Modulus, TLX, RELINE Small Stature and COHERE. Further, continued growth in the RELINE posterior fixation systems drove the top line. However, rise in pricing pressure and product mix had offset case volume growth of around 2%.
Revenue growth in the U.S. Surgical Support business was roughly flat in the first quarter, primarily due to weakness in the biologics portfolio along with persistent slowdown in the U.S. service business case volume growth.
However, the international business recorded 20% growth at CER or 28% on a reported basis for the sixth consecutive time on solid contributions from key geographies.
In the reported quarter, there was a 20.2% increase in cost of goods sold after excluding amortization of intangible assets expenses. Accordingly, gross profit declined 0.5% to $186.7 million. Moreover, the company reported a 360-basis point (bps) year-over-year contraction in gross margin to 71.7%.
Sales, marketing and administrative expenses went up 4.6% to $146.8 million and research and development expenses rose 16.9% to $14.5 million.
NuVasive recorded adjusted operating income of $25.4 million in the reported quarter, reflecting a 27% decline from the year-ago quarter. Adjusted operating margin contracted 420 bps to 9.8% in the quarter.
The company exited first quarter with cash and cash equivalents of $73.7 million, down from $72.8 million at the end of 2017.
Outlook
NuVasive reiterated the guidance for 2018. The guidance has been adjusted for the recent buyout of SafePassage, full-year benefits from U.S. tax reform and suspension of the medical device tax.
The company expects 2018 revenues in the range of $1.095 billion to $1.105 billion, reflecting 4.7% to 5.7% organic growth. Moreover, on a reported basis, the company expects revenue growth of 6.7% to 7.6%, inclusive of the recently-acquired SafePassage. The Zacks Consensus Estimate of $1.10 billion is within the guided range. Foreign exchange rates are expected to prove favorable for NuVasive in 2018. In fact, the company expects foreign exchange rates to have a positive impact of almost $10 million in the year compared with $5 million stated previously.
NuVasive continues to expect full-year 2018 adjusted EPS within $2.44-$2.47. The current Zacks Consensus Estimate of $2.46 falls within the guided range. Additionally, adjusted operating margin for the year is expected at 17.6%.
Our Take
NuVasive had a disappointing first quarter, thanks to softness in both of its businesses. However, a solid show by the international business with more than 20% growth for the sixth consecutive quarter buoys optimism.
Further, management believes that the addition of Lateral Single-Position Surgery to expand its lateral procedural solutions offerings along with enhancement of the Advanced Materials Science portfolio will help the company improve its performance in the rest of the year. Moreover, the initial launch of the Surgical Intelligence platform will help NuVasive strengthen its position. The company also expects to see a 400-bps improvement in gross margin in the second half of 2018 as a result of its focus on in-house manufacturing facility. In this regard, the company is also upbeat about increasing production in Ohio manufacturing facility
NuVasive’s expectations of higher adjusted operating profit margin in 2018 reflect its focus on operational efficiencies and in-house manufacturing facility as well. Moreover, we are upbeat about the recently-completed buyout of SafePassage, which contributed around $4.5 million to revenue growth in the first quarter.
Zacks Rank & Key Picks
NuVasive has a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader medical sector which reported solid results this season are Intuitive Surgical (ISRG - Free Report) , Chemed Corporation (CHE - Free Report) and Baxter International Inc. (BAX - Free Report) . While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), Chemed and Baxter carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical reported first-quarter 2018 adjusted EPS of $2.44, which beat the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, also surpassing the consensus estimate by 10.6%.
Chemed posted first-quarter 2018 adjusted EPS of $2.72, steering past the Zacks Consensus Estimate of $2.37. Revenues came in at $439.2 million, beating the Zacks Consensus Estimate of $420 million.
Baxter posted first-quarter 2018 adjusted EPS of 70 cents, which beat the Zacks Consensus Estimate by 12.9%. Revenues of $2.68 billion also edged past the Zacks Consensus Estimate of $2.62 billion.
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NuVasive (NUVA) Q1 Earnings Miss Estimates, Revenues In Line
NuVasive, Inc. reported first-quarter 2018 adjusted earnings per share (EPS) of 39 cents, reflecting a 5.4% rise from the year-ago quarter. The figure, however, missed with the Zacks Consensus Estimate of 45 cents.
Solid contributions from the international business along with strong case volume growth in the U.S. Hardware businessled to the year-over-year improvement in earnings.
Including one-time items, the company reported first-quarter 2018 net loss of 53 cents per share against a net income of 22 cents per share a year ago. Rise in litigation liability of $29.0 million associated with the company's lawsuit with a former sales agent led to the net loss.
Revenues in the reported quarter came in at $260.5 million, up 4.6% (up 3.4% at constant exchange rate or CER) from the year-ago $249 million. The figure was on par with the Zacks Consensus Estimate.
In the reported quarter, revenues at the U.S. Spinal Hardware business increased around 1% led by rise in case volumes of roughly 5% along with contribution from product launches like XLIF Modulus, TLX, RELINE Small Stature and COHERE. Further, continued growth in the RELINE posterior fixation systems drove the top line. However, rise in pricing pressure and product mix had offset case volume growth of around 2%.
Revenue growth in the U.S. Surgical Support business was roughly flat in the first quarter, primarily due to weakness in the biologics portfolio along with persistent slowdown in the U.S. service business case volume growth.
However, the international business recorded 20% growth at CER or 28% on a reported basis for the sixth consecutive time on solid contributions from key geographies.
NuVasive, Inc. Price, Consensus and EPS Surprise
NuVasive, Inc. Price, Consensus and EPS Surprise | NuVasive, Inc. Quote
In the reported quarter, there was a 20.2% increase in cost of goods sold after excluding amortization of intangible assets expenses. Accordingly, gross profit declined 0.5% to $186.7 million. Moreover, the company reported a 360-basis point (bps) year-over-year contraction in gross margin to 71.7%.
Sales, marketing and administrative expenses went up 4.6% to $146.8 million and research and development expenses rose 16.9% to $14.5 million.
NuVasive recorded adjusted operating income of $25.4 million in the reported quarter, reflecting a 27% decline from the year-ago quarter. Adjusted operating margin contracted 420 bps to 9.8% in the quarter.
The company exited first quarter with cash and cash equivalents of $73.7 million, down from $72.8 million at the end of 2017.
Outlook
NuVasive reiterated the guidance for 2018. The guidance has been adjusted for the recent buyout of SafePassage, full-year benefits from U.S. tax reform and suspension of the medical device tax.
The company expects 2018 revenues in the range of $1.095 billion to $1.105 billion, reflecting 4.7% to 5.7% organic growth. Moreover, on a reported basis, the company expects revenue growth of 6.7% to 7.6%, inclusive of the recently-acquired SafePassage. The Zacks Consensus Estimate of $1.10 billion is within the guided range. Foreign exchange rates are expected to prove favorable for NuVasive in 2018. In fact, the company expects foreign exchange rates to have a positive impact of almost $10 million in the year compared with $5 million stated previously.
NuVasive continues to expect full-year 2018 adjusted EPS within $2.44-$2.47. The current Zacks Consensus Estimate of $2.46 falls within the guided range. Additionally, adjusted operating margin for the year is expected at 17.6%.
Our Take
NuVasive had a disappointing first quarter, thanks to softness in both of its businesses. However, a solid show by the international business with more than 20% growth for the sixth consecutive quarter buoys optimism.
Further, management believes that the addition of Lateral Single-Position Surgery to expand its lateral procedural solutions offerings along with enhancement of the Advanced Materials Science portfolio will help the company improve its performance in the rest of the year. Moreover, the initial launch of the Surgical Intelligence platform will help NuVasive strengthen its position. The company also expects to see a 400-bps improvement in gross margin in the second half of 2018 as a result of its focus on in-house manufacturing facility. In this regard, the company is also upbeat about increasing production in Ohio manufacturing facility
NuVasive’s expectations of higher adjusted operating profit margin in 2018 reflect its focus on operational efficiencies and in-house manufacturing facility as well. Moreover, we are upbeat about the recently-completed buyout of SafePassage, which contributed around $4.5 million to revenue growth in the first quarter.
Zacks Rank & Key Picks
NuVasive has a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader medical sector which reported solid results this season are Intuitive Surgical (ISRG - Free Report) , Chemed Corporation (CHE - Free Report) and Baxter International Inc. (BAX - Free Report) . While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), Chemed and Baxter carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical reported first-quarter 2018 adjusted EPS of $2.44, which beat the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, also surpassing the consensus estimate by 10.6%.
Chemed posted first-quarter 2018 adjusted EPS of $2.72, steering past the Zacks Consensus Estimate of $2.37. Revenues came in at $439.2 million, beating the Zacks Consensus Estimate of $420 million.
Baxter posted first-quarter 2018 adjusted EPS of 70 cents, which beat the Zacks Consensus Estimate by 12.9%. Revenues of $2.68 billion also edged past the Zacks Consensus Estimate of $2.62 billion.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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