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Why Is NuVasive (NUVA) Up 1.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for NuVasive (NUVA - Free Report) . Shares have added about 1.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NuVasive due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

NuVasive's Q2 Earnings Beat Estimates, Revenues Miss

NuVasive delivered second-quarter 2020 adjusted loss per share of 40 cents, slipping from the year-ago earnings per share of 63 cents. However, the figure was narrower than the Zacks Consensus Estimate of a loss of 49 cents per share.

The one-time adjustments include expenses associated with certain ongoing litigation matters and amortization expenses.

GAAP loss per share came in at 98 cents, down from the year-ago earnings per share of 29 cents.

The year-over-year decline can be attributed to significantly lower revenues on a year-over-year basis due to the coronavirus outbreak.

Total Revenues

Revenues in the second quarter totaled $203.6 million, down 30.3% year over year on a reported basis (down 30.2% at CER). The top line lagged the Zacks Consensus Estimate by 0.3%.

Notably, total revenues were within the company’s projection indicated in the preliminary results announced in July. The company noted that net sales exceeded the company’s expectations due to an uptick in monthly volumes in June.

Geographical & Segmental Details

In the reported quarter, U.S. Spinal Hardware business revenues declined 29% year over year to $113.8 million. The company noted that despite disappointing performance by the segment, its X360 system has been a key growth driver.

Revenues from the U.S. Surgical Support business were $47.2 million in the second quarter, down 36.2% year over year. The business experienced a slowdown in volumes due to the pandemic and NuVasive clinical services payer mix dynamics.

In the quarter, the company registered international revenues of $42.6 million, reflecting a 26.4% year-over-year fall on a reported basis and 25.7% fall at CER. This resulted from non-uniform impact of and recovery from the pandemic across geographies based on local response to the pandemic.

Margin Details

In the reported quarter, gross profit declined 42.6% year over year to $123.1 million. Gross margin contracted 1298 basis points (bps) to 60.5%.

Selling, general and administrative expenses declined 17.3% year over year to $126.4 million, whereas research and development expenses climbed 10.6% year over year to $19.4 million.

Adjusted operating loss was $22.7 million against the year-ago operating income of $44.1 million.

Operational Update

The company exited the second quarter with cash and cash equivalents, and short-term marketable securities of $926.8 million compared with $511.9 million at the end of the first quarter.

Cumulative net cash provided by operating activities at the end of the second quarter was $33.1 million compared with the prior-year period’s $93.4 million.

Guidance

NuVasive noted that it is currently not reinstituting its financial guidance for the year as the scope for spine surgery volumes for the remainder of the year continues to be limited. The company is also currently unable to predict the pace and time of recovery of the elective surgery volumes.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 30.85% due to these changes.

VGM Scores

At this time, NuVasive has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, NuVasive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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