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Globus Medical (GMED) US Spine Grows, Pricing Pressure Stays

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On Jan 18, we issued an updated research report on Globus Medical, Inc. (GMED - Free Report) . The company continues to witness higher demand for its Musculoskeletal Solutions products. Meanwhile, it is expanding its footprint in the overseas markets by consolidating direct and distributors’ sales force. The stock currently carries a Zacks Rank #3 (Hold).

Over the past three months, shares of Globus Medical have outperformed the industry. The stock has gained 16.1% compared with 4.9% growth of the sector.

Globus Medical exited the third quarter of 2020 with better-than-expected results despite the pandemic-led business disruptions. The 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.

Musculoskeletal Solutions increased 14%, led by the U.S. spinal implant business, which grew 17% during the third quarter. Though revenues from enabling technologies were down $5 million year over year, the same went up 66% sequentially. We are upbeat about the company’s stupendous investments in its R&D wing. Globus Medical launched several products in its spine portfolio, which instill investors’ confidence in the stock.

Meanwhile, the pandemic has wreaked havoc on Globus Medical’s overall business. The business bottomed in mid-April. However, since then, there has been a visible rebound in the company’s revenue trend that continued with a steady climb upward through the third quarter.

As the economy opened up again in the July-September quarter, the capital teams were able to begin rebuilding pipelines and moving deals along. Many of these deals closed in October, and the company actually sold more robots in October than it did for all of the September-end quarter.

This growth, according to the company, came on a number of factors, including new product launches, competitive recruiting and robotic pull through.

The company rolled out five new products in 2020 and has seen tremendous uptake in the HEDRON line of 3D printed inner body spacers and its fourth-generation expandable MIS TLIF device. Its adoption has been so successful that Globus Medical is currently doubling its 3D manufacturing capacity, which would come online in the fourth quarter.

On the flip side, the musculoskeletal devices industry is characterized by intensifying competitive pricing pressure. Pricing continues to be a major headwind for Globus Medical. Throughout 2019 and till the third quarter of 2020, the company’s top-line growth was partially dampened by the prevailing pricing pressure.

Further, gross margin contractions are worrying. Stiff competition and foreign-exchange impacts are other concerns.

Key Picks

Some better-ranked stocks from the broader medical space include AdaptHeath Corp. (AHCO - Free Report) , Quidel Corporation (QDEL - Free Report) , Meridian Bioscience Inc. (VIVO - Free Report) , each sporting a Zacks Ranks #1 (Strong Buy). You can see the complete list of Zacks #1 Rank stocks here.

AdaptHealth has a projected long-term earnings growth rate of 720%.

Quidel has a projected long-term earnings growth rate of 25%.

Meridian Bioscience has a projected long-term earnings growth rate of 13%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020.Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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