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Nevro (NVRO) Stock Falls 19% Despite Q1 Earnings Beat

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Shares of Nevro Corp. (NVRO - Free Report) fell 19% till May 6, following the company's first-quarter 2022 results announcement on May 4.

Nevro reported loss per share of 98 cents for the first quarter of 2022, wider than the loss of 85 cents reported in the year-ago quarter. Loss per share was narrower than the Zacks Consensus Estimate of a loss of $1.11.

Revenues in Detail

Nevro registered revenues of $87.8 million in the first quarter, down 0.9% year over year on a reported basis. The figure, however, surpassed the Zacks Consensus Estimate by 2%.

At constant exchange rate (“CER”), revenues were flat year over year.

Worldwide revenues include approximately $6 million of Painful Diabetic Neuropathy (“PDN”) revenues.

Quarterly Highlights

In the quarter under review, international revenues were $14.6 million, up 5% year over year on a reported basis and 12% at CER. Despite the uptick, revenues continued to be impacted by pandemic-induced issues, including patient behavior and healthcare facility restrictions (though these factors improved over the course of the quarter).

U.S. revenues for the quarter totaled $73.2 million, down 2% year over year. Total U.S. permanent implant procedures increased 2%, while U.S. trial procedures increased 10%. Trial and permanent implant volumes were impacted by pandemic-related issues and facility closures in the first half of the quarter but improved over the remainder of the quarter.

U.S. PDN trial procedures grew by 47% sequentially.

Nevro Corp. Price, Consensus and EPS Surprise

Nevro Corp. Price, Consensus and EPS Surprise

Nevro Corp. price-consensus-eps-surprise-chart | Nevro Corp. Quote

Margin Trend

In the quarter under review, Nevro’s gross profit fell 5.1% to $59.1 million. Gross margin contracted 303 basis points (bps) to 67.3%.

Sales, general & administrative expenses rose 8.3% to $79.3 million. Research and development expenses went up 8.7% year over year to $12.5 million. Total operating expenses of $91.9 million increased 8.3% year over year.

Operating loss in the reported quarter totaled $32.8 million compared with total operating loss of $22.5 million in the year-ago quarter.

Financial Position

Nevro exited first-quarter 2022 with cash and cash equivalents, and short-term investments of $323.6 million compared with $362 million at the end of 2021. Long-term debt at the end of first-quarter 2022 was $185.9 million compared with $151.3 million at the end of 2021.

As of Mar 31, 2022, 290,000,000 shares were authorized, 35,876,367 shares issued and 35,193,451 shares were outstanding.

Guidance

Nevro has issued its financial outlook for the second- quarter 2022 and reiterated the same for the full year.

The company projects second-quarter 2022 worldwide revenues in the range of $103 million-$106 million. The Zacks Consensus Estimate for the same is pegged at $104.5 million.

The second-quarter outlook assumes that pandemic-related impacts will continue to steadily decline in the quarter.

Nevro expects its full-year 2022 worldwide revenues to be in the range of $415-$430 million, reflecting a 7-11% increase from the 2021 reported figure. The Zacks Consensus Estimate for the same is pegged at $423.4 million.

Full-year revenue growth at CER is likely to be 8-12% over comparable 2021 figures.

However, full-year 2022 worldwide revenue guidance now includes approximately $27-$32 million of PDN revenues, up from the previous projection of $25-$30 million.

Our Take

Nevro exited the first quarter of 2022 with better-than-expected results. Robust international revenues are impressive. Uptick in total U.S. permanent implant procedures as well as U.S. trial procedures is promising. Sequential improvement in U.S. PDN trial procedures is encouraging. The company, during the quarter, announced positive payer coverage progress from UnitedHealthcare and Noridian for high-frequency 10 kHz Therapy for the treatment of PDN, which raises our optimism. Positive 12-month data from the SENZA-NSRBP (non-surgical refractory back pain) randomized controlled trial are also encouraging.

On the flip side, dismal top- and bottom-line performances are concerning. Lower worldwide revenues due to soft domestic performance are discouraging. Contraction of the gross margin also does not bode well. Sustained operating loss incurred by Nevro also raises our apprehension.

Zacks Rank and Key Picks

Nevro currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Omnicell, Inc. (OMCL - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Alkermes plc (ALKS - Free Report) .

Omnicell, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted earnings per share (“EPS”) of 83 cents, which beat the Zacks Consensus Estimate by 16.9%. Revenues of $318.8 million outpaced the consensus mark by 0.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Omnicell has an estimated long-term growth rate of 16%. OMCL’s earnings surpassed estimates in three of the trailing four quarters, the average surprise being 13.4%.

UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently carries a Zacks Rank #2.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.

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