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Globus Medical (GMED) Q2 Earnings Beat, Gross Margin Dips
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Globus Medical, Inc. (GMED - Free Report) reported second-quarter 2022 adjusted earnings per share (EPS) of 56 cents, beating the Zacks Consensus Estimate by 3.7%. The metric however remained unchanged year over year.
The adjusted EPS excludes certain non-recurring expenses like amortization of intangibles, and acquisition-related costs among others.
Our projection of adjusted EPS was 55 cents.
Without the adjustments, the company registered GAAP EPS of 53 cents per share, reflecting a 32.5% surge year over year.
Revenues
Second-quarter 2022 worldwide sales totaled $263.6 million, up 5% year over year and 6.5% at constant exchange rate or CER. The reported figure exceeded the Zacks Consensus Estimate by 1.9%.
The second-quarter revenues compare favorably with our estimate of $261.6 million.
Quarterly Details
Sales generated in the United States during the quarter under review improved 4.7% year over year to $225.3 million. Continued market share gain within U.S. Spine, higher sales of enabling technologies' robotic systems, new sales related to the rollout of the E3D imaging system, and continued growth within its trauma business contributed to this growth.
We expected U.S. revenues to be $224.1 million in Q2.
Internationally, revenues were $38.4 million, up 6.9% on a reported basis and 17.3% at CER, driven by the continued global expansion of the company’s robotics portfolio.
Globus Medical, Inc. Price, Consensus and EPS Surprise
International revenues per our model were projected to be $37.5 million in Q2.
Musculoskeletal Solutions products generated revenues of $234.2 million, up 3.1% year over year at CER, driven by growth in spine and trauma implant portfolios, partially offset by constant currency impacts and lower sales in Japan.
Our projection for the Musculoskeletal Solutions segment’s Q2 revenues was $242.1 million.
Enabling Technologies product revenues of $29.4 million in the quarter reflected a 44.4% surge at CER from the prior-year figure, favorably impacted by the initial shipment and sales of the E3D imaging system.
Per the Zacks Model, Enabling Technologies product segment’s Q2 revenues were estimated to be $19.5 million.
Margin
Gross profit in the reported quarter increased 4.3% year over year to $195.2 million. The gross margin contracted 54 basis points (bps) to 74% due to a 7.2% rise in the cost of goods sold to $68.5 million.
We projected a gross margin of 72.6% for Q2.
Selling, general and administrative expenses fell 0.5% in the reported quarter to $106.7 million. Research and development expenses rose 11.9% to $17.4 million.
Overall adjusted operating profit was $71.1 million, reflecting a 10.4% rise from the year-ago quarter. The adjusted operating margin expanded 131.1 bps in the quarter to 26.9%.
Cash Position
Globus Medical exited the second quarter of 2022 with cash and cash equivalents, and short-term marketable securities of $407.9 million compared with $473.3 million at the end of Q1.
Cumulative net cash provided by operating activities at the end of the second quarter of 2022 was $81.6 million compared with the year-ago figure of $122.8 million.
2022 Guidance
The company has reaffirmed its 2022 guidance.
Full-year net sales are projected to be $1.025 billion. The Zacks Consensus Estimate for the same is currently pegged at $1.02 billion.
The company’s adjusted EPS guidance for 2022 is $2.10. The Zacks Consensus Estimate for the same is also pegged at $2.10 currently.
Our Take
Globus Medical exited the second quarter of 2022, with better-than-expected earnings and revenues. The company encouragingly noted that the Q2 surpassed a difficult 2021 comparable of 69% growth. The reported quarter also witnessed 14% sequential growth with stronger performance throughout the portfolio, setting a new monthly sales record in June, where the company exceeded $100 million in monthly sales for the first time.
On the flip side, escalating costs are building pressure on the gross margin.
Zacks Rank and Key Picks
Globus Medical currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated (DGX - Free Report) , Humana Inc. (HUM - Free Report) and Alkermes plc (ALKS - Free Report) .
Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Quest Diagnostics has an earnings yield of 7% compared with the industry’s 3.2%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.
Humana, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $8.67, which beat the Zacks Consensus Estimate by 13%. Revenues of $23.7 billion outpaced the consensus mark by 1.2%.
Humana has an estimated long-term growth rate of 13.5%. HUM’s earnings surpassed estimates in all the trailing four quarters, the average being 9.1%.
Alkermes reported second-quarter 2022 adjusted EPS of 6 cents, which surpassed the Zacks Consensus Estimate by 50%. Second-quarter revenues of $276.2 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.
Alkermes has an estimated long-term growth rate of 24.9%. ALKS’s earnings surpassed estimates in all the trailing four quarters, the average being 325.5%.
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Globus Medical (GMED) Q2 Earnings Beat, Gross Margin Dips
Globus Medical, Inc. (GMED - Free Report) reported second-quarter 2022 adjusted earnings per share (EPS) of 56 cents, beating the Zacks Consensus Estimate by 3.7%. The metric however remained unchanged year over year.
The adjusted EPS excludes certain non-recurring expenses like amortization of intangibles, and acquisition-related costs among others.
Our projection of adjusted EPS was 55 cents.
Without the adjustments, the company registered GAAP EPS of 53 cents per share, reflecting a 32.5% surge year over year.
Revenues
Second-quarter 2022 worldwide sales totaled $263.6 million, up 5% year over year and 6.5% at constant exchange rate or CER. The reported figure exceeded the Zacks Consensus Estimate by 1.9%.
The second-quarter revenues compare favorably with our estimate of $261.6 million.
Quarterly Details
Sales generated in the United States during the quarter under review improved 4.7% year over year to $225.3 million. Continued market share gain within U.S. Spine, higher sales of enabling technologies' robotic systems, new sales related to the rollout of the E3D imaging system, and continued growth within its trauma business contributed to this growth.
We expected U.S. revenues to be $224.1 million in Q2.
Internationally, revenues were $38.4 million, up 6.9% on a reported basis and 17.3% at CER, driven by the continued global expansion of the company’s robotics portfolio.
Globus Medical, Inc. Price, Consensus and EPS Surprise
Globus Medical, Inc. price-consensus-eps-surprise-chart | Globus Medical, Inc. Quote
International revenues per our model were projected to be $37.5 million in Q2.
Musculoskeletal Solutions products generated revenues of $234.2 million, up 3.1% year over year at CER, driven by growth in spine and trauma implant portfolios, partially offset by constant currency impacts and lower sales in Japan.
Our projection for the Musculoskeletal Solutions segment’s Q2 revenues was $242.1 million.
Enabling Technologies product revenues of $29.4 million in the quarter reflected a 44.4% surge at CER from the prior-year figure, favorably impacted by the initial shipment and sales of the E3D imaging system.
Per the Zacks Model, Enabling Technologies product segment’s Q2 revenues were estimated to be $19.5 million.
Margin
Gross profit in the reported quarter increased 4.3% year over year to $195.2 million. The gross margin contracted 54 basis points (bps) to 74% due to a 7.2% rise in the cost of goods sold to $68.5 million.
We projected a gross margin of 72.6% for Q2.
Selling, general and administrative expenses fell 0.5% in the reported quarter to $106.7 million. Research and development expenses rose 11.9% to $17.4 million.
Overall adjusted operating profit was $71.1 million, reflecting a 10.4% rise from the year-ago quarter. The adjusted operating margin expanded 131.1 bps in the quarter to 26.9%.
Cash Position
Globus Medical exited the second quarter of 2022 with cash and cash equivalents, and short-term marketable securities of $407.9 million compared with $473.3 million at the end of Q1.
Cumulative net cash provided by operating activities at the end of the second quarter of 2022 was $81.6 million compared with the year-ago figure of $122.8 million.
2022 Guidance
The company has reaffirmed its 2022 guidance.
Full-year net sales are projected to be $1.025 billion. The Zacks Consensus Estimate for the same is currently pegged at $1.02 billion.
The company’s adjusted EPS guidance for 2022 is $2.10. The Zacks Consensus Estimate for the same is also pegged at $2.10 currently.
Our Take
Globus Medical exited the second quarter of 2022, with better-than-expected earnings and revenues. The company encouragingly noted that the Q2 surpassed a difficult 2021 comparable of 69% growth. The reported quarter also witnessed 14% sequential growth with stronger performance throughout the portfolio, setting a new monthly sales record in June, where the company exceeded $100 million in monthly sales for the first time.
On the flip side, escalating costs are building pressure on the gross margin.
Zacks Rank and Key Picks
Globus Medical currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated (DGX - Free Report) , Humana Inc. (HUM - Free Report) and Alkermes plc (ALKS - Free Report) .
Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Quest Diagnostics has an earnings yield of 7% compared with the industry’s 3.2%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.
Humana, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $8.67, which beat the Zacks Consensus Estimate by 13%. Revenues of $23.7 billion outpaced the consensus mark by 1.2%.
Humana has an estimated long-term growth rate of 13.5%. HUM’s earnings surpassed estimates in all the trailing four quarters, the average being 9.1%.
Alkermes reported second-quarter 2022 adjusted EPS of 6 cents, which surpassed the Zacks Consensus Estimate by 50%. Second-quarter revenues of $276.2 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.
Alkermes has an estimated long-term growth rate of 24.9%. ALKS’s earnings surpassed estimates in all the trailing four quarters, the average being 325.5%.