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Why Is NuVasive (NUVA) Down 5.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for NuVasive (NUVA - Free Report) . Shares have lost about 5.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is NuVasive 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 catalysts.

NuVasive Q1 Earnings Top Estimates, Gross Margin Up

NuVasive delivered first-quarter 2021 adjusted earnings per share of 37 cents, down 22.9% from the year-ago figure. However, the figure beat the Zacks Consensus Estimate by 12.1%.

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

GAAP loss per share came in at 15 cents, deteriorating from the year-ago EPS of 10 cents.

Total Revenues

Revenues in the first quarter totaled $271.2 million, up 4.4% year over year on a reported basis (up 3.1% at constant exchange rate or CER). The top line surpassed the Zacks Consensus Estimate by 3.9%.

The increase was a result of month-over-month improvement in U.S. procedural volumes and low double-digit international growth on a reported basis as the impact of COVID-19 on elective surgeries continues to lessen.

Geographical & Segmental Details

In the reported quarter, U.S. Spinal Hardware business revenues rose 4.9% year over year to $145.2 million. The business was partly boosted by NuVasive’s thoracolumbar portfolio, which was primarily driven by continued adoption of advanced material science implants. Also, strong results from the clinical evaluation of Modulus ALIF and Reline 3D within the company’s pediatric portfolio contributed to the growth. However, this was offset by slower recovery in the XLIF franchise due to the pandemic.

Revenues from the U.S. Surgical Support business were $61.2 million in the first quarter, down 4.7% year over year. This sales decline was due to low levels of stocking orders within its biologics or interoperative neuromonitoring product lines due to the pandemic, creating additional pressure for procedural mix during the reported quarter.

In the quarter, the company registered international revenues of $64.8 million, reflecting a 13.4% year-over-year rise on a reported basis and 7.8% increase at CER. This resulted from strong contributions from the Asia Pacific region, which grew double-digits within the quarter on continued product adoption across all procedural segments.

Margin Details

In the reported quarter, gross profit improved 6.1% year over year to $199.4 million. Gross margin expanded 118 basis points (bps) to 73.5%.

Selling, general and administrative expenses increased 12.1% year over year to $145.9 million, whereas research and development (R&D) expenses climbed 21.7% year over year to $22.2 million.

Overall adjusted operating profit was $31.3 million, down 20.9% year over year. Adjusted operating margin was 11.5%, reflecting a 369-bp contraction year over year.

Operational Update

The company exited first-quarter 2021 with cash and cash equivalents, and short-term marketable securities of $233.9 million compared with $856.9 million at the end of 2020.

Cumulative net cash provided by operating activities at the end of first-quarter 2021 was $31.6 million compared with the prior-year period’s $5.2 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -13.83% due to these changes.

VGM Scores

At this time, NuVasive has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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