A month has gone by since the last earnings report for Globus Medical (GMED - Free Report) . Shares have lost about 2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Globus Medical due for a breakout? 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.
Globus Medical Beats on Q2 Earnings and Revenues
Globus Medical reported second-quarter 2020 adjusted earnings per share (EPS) of 7 cents, which compared favorably with the Zacks Consensus Estimate of a loss of 11 cents. However, the metric declined 13.9% from the year-ago figure.
Adjusted EPS excludes certain non-recurring expenses like amortization of intangibles and acquisition-related costs.
Without the adjustments, the company registered GAAP loss per share of 21 cents per share, reflecting a decline from the year-ago quarter’s EPS of 38 cents.
Second-quarter 2020 worldwide sales totaled $148.9 million, down 23.4% (down 23.3% at constant exchange rate or CER) year over year. The reported figure, however, surpassed the Zacks Consensus Estimate by 49.3%.
Sales generated in the United States during the quarter under review declined 21.8% year over year due to adverse impacts of the coronavirus pandemic. The pandemic-led impacts on sales were most pronounced in the earlier part of the quarter. However, as the quarter progressed, overall sales improved sequentially from the last reported quarter, led by the U.S. spine business. The company also noted that robotic technology maintained its momentum, which enabled the company to enter into several agreements in June and July.
International sales declined 31.2% from the year-earlier quarter (down 30.5% at CER). The primary reason for the plunge is pandemic-led business disruptions.
Musculoskeletal Solutions products generated revenues of $143.5 million, down 21.4% year over year. Enabling Technologies product revenues of $5.4 million in the quarter reflect a 54.7% plunge from the prior-year figure.
Gross profit in the reported quarter dropped 34.7% year over year to $98.3 million. Gross margin contracted a huge 1139 basis points (bps) to 65.9% on a 15.1% rise in cost of goods sold to $50.6 million.
Selling, general and administrative expenses in the reported quarter were $80.02 million, down 9.5% from the year-ago quarter. Research and development expenses, however, rose 150.6% to $39.5 million.
Operating loss in the reported quarter was $21.2 million against operating income of $46.4 million year over year.
Globus Medical exited the second quarter with cash and cash equivalents, and short-term marketable securities of $316.7 million compared with $276.9 million at the end of the first quarter.
Notably, the company remains debt free.
Cumulative net cash provided by operating activities at the end of the second quarter was $65.4 million compared with the year-ago $61.8 million.
Globus Medical is currently unable to predict the extent or duration of the pandemic’s impact on its financial and operating results. Accordingly, the company has not provided any financial guidance.
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 38.71% due to these changes.
At this time, Globus Medical has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Globus Medical has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.