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Here's Why You Should Hold on to Globus Medical (GMED) for Now

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Globus Medical, Inc. (GMED - Free Report) has been gaining from sequential segmental growth and increased demand for its products. The company’s focus on partnerships and worldwide expansion to drive growth are expected to contribute further. However, stiff competition and a lower demand for healthcare products remain concerns.

Over the past year, the Zacks Rank #3 (Hold) stock has gained 5.9% compared with 18.6% growth of the industry and 18.3% rise of the S&P 500.

The renowned provider of medical devices for musculoskeletal disorders has a market capitalization of $5.99 billion. It projects 11.2% growth over the next five years and expects to maintain its strength in robotic technology. The company surpassed estimates in two of the trailing four quarters and missed in the other two, with the average earnings surprise being 47.11%.

Let’s delve deeper.

Robust Q3 Results: We are upbeat about Globus Medical’s impressive performance in the third quarter. Improvement in the company’s U.S. revenues, led by the U.S. spine business, looks encouraging. Competitive recruiting and onboarding, pull through from a growing base of robotic installations, and impressive uptake from product introductions were all strong contributors to growth.

Robust growth of the Musculoskeletal Solutions, led by U.S. spinal implant business, is also impressive. The sequential uptick in Enabling Technologies revenues boosts investors’ confidence. We are upbeat about the company’s stupendous investments in its R&D wing. Globus Medical launched several products in its spine portfolio, raising optimism on the stock.

Steady Pace of Product Development: Globus Medical has been recording robust demand for various products in the HEDRON line of 3D-printed interbody spacers. Further, the company launched SABLE, which is the fourth-generation expandable MIS TLIF interbody spacer. It witnessed strong demand and favorable feedback from customers.

The company is on track with the development of several enhancements to imaging, navigation and robotic (“INR”) portfolio of the Enabling Technologies business, including a cranial robotic application and an imaging system. Despite some delays in INR development efforts due to COVID-19, the company witnessed significant progress in the commercialization of various systems.

Solid Domestic Spine Arm: Globus Medical’s U.S. Spine business accelerated considerably in the first quarter, showing a continued growth trend over the past few quarters. The company launched five new products in 2020. Further, the company has seen tremendous uptake in the HEDRON line of 3D-printed inner body spacers and its fourth generation expandable MIS TLIF device.

Adoption has been so successful that Globus Medical is currently doubling its 3D manufacturing capacity which should come online in the fourth quarter. Further, the company, in November, announced the first surgeries with ExcelsiusGPS Interbody Solutions.

Downsides

Competitive Landscape: Globus Medical’s operation in a highly competitive industry which includes biggies like Zimmer Biomet Holdings, Inc. (ZBH - Free Report) , may induce headwinds. Globus Medical needs to constantly introduce or acquire new products to withstand the competitive pressure and maintain its market share in the intensely competitive musculoskeletal devices market.

Lower Demand for Healthcare Products: Globus Medical is persistently challenged by soft demand for health care products. Additionally, weak reimbursements for medical products and services may impose a downward pressure on the prices of the company’s products, and also lead to longer sales cycles and the slower adoption of new technologies, which will ultimately impact the top line.

Estimate Trend

Globus Medical has been witnessing a positive estimate revision trend for 2020. Over the past 90 days, the Zacks Consensus Estimate for its current-year earnings has moved north by 19.6% to $1.34.

The Zacks Consensus Estimate for fourth-quarter 2020 revenues is pegged at $234.4 million, suggesting growth of 10.7% from the year-ago reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Hologic, Inc. (HOLX - Free Report) and ResMed Inc. (RMD - Free Report) .

Hologic’s long-term earnings growth rate is estimated at 17.4%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ResMed’s long-term earnings growth rate is estimated at 14.5%. The company presently carries a Zacks Rank #2 (Buy).

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