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Bear of the Day: NuVasive (NUVA)

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NuVasive (NUVA - Free Report) is a $5 billion maker of specialized technology for spinal surgery. The company's portfolio is focused on minimally-invasive procedures and includes access instruments, implantable hardware, biologics, and software systems for surgical planning, navigation and imaging solutions.
The reason that NUVA is once again a Zacks #5 Rank is that analysts once again ratcheted down EPS estimates recently.
In the past 30 days, full-year 2018 profit projections dropped from $2.39 to $2.18.
And 2019 estimates were clipped from $2.72 to $2.49. Both years still represent 14% annual growth, but its the Magnitude and direction of estimate changes we are most concerned about with the Zacks Rank. Plus, this consensus shift involved most covering analysts, so we have the Agreement factor of the Rank as well.
Q3 Results in Focus
On October 30, NuVasive reported third-quarter 2018 adjusted EPS of 56 cents, reflecting a 9.8% advance from the year-ago quarter. The bottom line, however, fell short of the Zacks Consensus Estimate of 63 cents per share.
On a reported basis, Q3 EPS was 30 cents, a big decline from the year-ago period’s 64 cents.
Revenues came in at $271.3 million, also up 9.8% year-over-year and beating consensus by 2%.
Breaking down revenues by segment, sales at the U.S. Spinal Hardware business increased around 7% to $146.1 million, driven by product launches in the United States, namely modular 3D printed titanium implants for TLIF and XLIF, Porous PEEK offerings, expanded PLF implant offerings and RELINE Small Stature.
Revenues in the U.S. Surgical Support business were $72.6 million for the quarter, up 17.1% year over year, driven by strong services business and a better-than-expected performance in Biologics. Excluding the $5 million contribution from the SafePassage acquisition, the organic U.S. Surgical Support revenues grew 10%.
The international business recorded revenues of $52.7 million, for 10.4% growth in constant currency. 
Adjusted gross margin was 72.8%, down 70 basis points year over year. Adjusted operating profit dipped 2.4% to $42.3 million. Accordingly, adjusted operating margin contracted 190 basis points to 15.6%.
Company Outlook
NuVasive provided an update on its guidance for 2018. On an adjusted basis, the company continues to expect 2018 revenues in the range of $1.105-$1.110 billion, reflecting 7.4-7.9% growth. Previously, the guided range was $1.095-$1.105, implying growth of 6.3-7.3%.
However, NuVasive lowered its full-year adjusted EPS forecast to a new range of $2.15-$2.23 from the past outlook of $2.37-$2.40. And this gave analysts their cue to drop this year's consensus.
NuVasive management said it expects to see strong demand for new products as well as positive surgeon conversion efforts as its new Lateral Single-Position Surgery procedure gains traction in the market.
And analysts have maintained 2019 sales growth outlook to reach $1.17 billion, representing a nearly 6% advance.
For a novel spinal technology trading at under 3 times growing sales, NuVasive remains a med-tech company to keep on your watch list. And after Medtronic (MDT - Free Report) scooped up spinal competitor Mazor Robotics MZOR for $1.64 billion, on only about $75 million in sales, it makes NUVA a potentially attractive acquisition target.
But you have to wait for better buying opportunities in NUVA. The Zacks Rank will let you know.
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