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Globus Medical (GMED) Global Growth Strong Despite Margin Woe
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Globus Medical (GMED - Free Report) continues to benefit from surging demand for its Musculoskeletal Solutions products. We are worried about the challenging pricing scenario that continues to plague Globus Medical. The stock carries a Zacks Rank #3 (Hold).
Over the past year, shares of Globus Medical have outperformed its industry. The stock has lost 0.9% compared with the 30.2% decline of the industry. Globus Medical exited the third quarter of 2022 with better-than-expected revenues. The company noted that the third quarter is typically challenging for capital sales.
Despite this, its total sales improved 11% year over year on a reported basis (up 13% at CER). U.S. Spine improved 9%, with notable gains across the product portfolio in expandables, 3D printed implants, cervical and lateral offerings, biologics and pedicle screws. The gains were driven by competitive rep conversions and robotic pull-through.
Competitive rep recruiting is tracking ahead of the prior year. Enabling Technology sales were up 20% at CER, driven by robotic and imaging system sales. According to Globus Medical, this was the highest third-quarter sales since the launch of Enabling Technology, surpassing last year’s third-quarter sales growth of 124% post-COVID.
Globus Medical’s international revenues currently account for 14.5% of the company’s total sales. International revenues for the third quarter grew 17.7% as reported, or 31.8% at CER. Strong growth was seen across the Spinal Implant portfolio. Further, the company continued to see solid gains, with ExcelsiusGPS sales growing internationally, mainly in Western Europe.
Within the spinal implant business, during the third quarter of 2022 on the international front, the company delivered 25% growth at CER. Double-digit growth was registered in most of the markets, including Australia, Brazil, India, Poland, and the United Kingdom, where growth rates continued to exceed 40% in each market.
Despite continued margin declines in Japan (a trend expected to continue through the third quarter), Globus Medical remains positive on the progress and potential of its international business for long-term growth as it continues to reset the Japanese market.
A strong solvency position is an added positive.
On the flip side, Globus Medical exited the third quarter of 2022 with an earnings miss. The third-quarter results included 7 cents of non-operating headwinds due to a higher tax rate and currency.
The escalating costs are building pressure on the gross margin. Gross profit in the reported quarter increased 10.2% year over year. The gross margin contracted 28 basis points (bps) to 74.2% due to an 11.8% rise in the cost of goods sold.
Selling, general and administrative expenses declined 10.5% in the reported quarter. Research and development expenses rose 17.9%.
The overall adjusted operating profit reflects a 7.7% rise from the year-ago quarter. The adjusted operating margin contracted 69 bps in the quarter to 24.9%.
The reduced adjusted EPS guidance, stemming from continued non-operating headwinds, is a major downside.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are ShockWave Medical, Inc. (SWAV - Free Report) , Orthofix Medical Inc. (OFIX - Free Report) and Merit Medical System (MMSI - Free Report) .
ShockWave Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 35% against the industry’s 32.6% fall in the past year.
Orthofix Medical, currently sporting a Zacks Rank #1 (Strong Buy), reported third-quarter 2022 adjusted EPS of 13 cents, which beat the Zacks Consensus Estimate by a stupendous 550%. Revenues of $114 million outpaced the consensus mark by 2.7%.
Orthofix Medical has an estimated next-year growth rate of 58.97%. OFIX’s earnings surpassed estimates in the trailing three quarters and missed in one, the average being 129.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Merit Medical, currently carrying a Zacks Rank of 2, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.
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Globus Medical (GMED) Global Growth Strong Despite Margin Woe
Globus Medical (GMED - Free Report) continues to benefit from surging demand for its Musculoskeletal Solutions products. We are worried about the challenging pricing scenario that continues to plague Globus Medical. The stock carries a Zacks Rank #3 (Hold).
Over the past year, shares of Globus Medical have outperformed its industry. The stock has lost 0.9% compared with the 30.2% decline of the industry. Globus Medical exited the third quarter of 2022 with better-than-expected revenues. The company noted that the third quarter is typically challenging for capital sales.
Despite this, its total sales improved 11% year over year on a reported basis (up 13% at CER). U.S. Spine improved 9%, with notable gains across the product portfolio in expandables, 3D printed implants, cervical and lateral offerings, biologics and pedicle screws. The gains were driven by competitive rep conversions and robotic pull-through.
Competitive rep recruiting is tracking ahead of the prior year. Enabling Technology sales were up 20% at CER, driven by robotic and imaging system sales. According to Globus Medical, this was the highest third-quarter sales since the launch of Enabling Technology, surpassing last year’s third-quarter sales growth of 124% post-COVID.
Globus Medical, Inc. Price
Globus Medical, Inc. price | Globus Medical, Inc. Quote
Globus Medical’s international revenues currently account for 14.5% of the company’s total sales. International revenues for the third quarter grew 17.7% as reported, or 31.8% at CER. Strong growth was seen across the Spinal Implant portfolio. Further, the company continued to see solid gains, with ExcelsiusGPS sales growing internationally, mainly in Western Europe.
Within the spinal implant business, during the third quarter of 2022 on the international front, the company delivered 25% growth at CER. Double-digit growth was registered in most of the markets, including Australia, Brazil, India, Poland, and the United Kingdom, where growth rates continued to exceed 40% in each market.
Despite continued margin declines in Japan (a trend expected to continue through the third quarter), Globus Medical remains positive on the progress and potential of its international business for long-term growth as it continues to reset the Japanese market.
A strong solvency position is an added positive.
On the flip side, Globus Medical exited the third quarter of 2022 with an earnings miss. The third-quarter results included 7 cents of non-operating headwinds due to a higher tax rate and currency.
The escalating costs are building pressure on the gross margin. Gross profit in the reported quarter increased 10.2% year over year. The gross margin contracted 28 basis points (bps) to 74.2% due to an 11.8% rise in the cost of goods sold.
Selling, general and administrative expenses declined 10.5% in the reported quarter. Research and development expenses rose 17.9%.
The overall adjusted operating profit reflects a 7.7% rise from the year-ago quarter. The adjusted operating margin contracted 69 bps in the quarter to 24.9%.
The reduced adjusted EPS guidance, stemming from continued non-operating headwinds, is a major downside.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are ShockWave Medical, Inc. (SWAV - Free Report) , Orthofix Medical Inc. (OFIX - Free Report) and Merit Medical System (MMSI - Free Report) .
ShockWave Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 35% against the industry’s 32.6% fall in the past year.
Orthofix Medical, currently sporting a Zacks Rank #1 (Strong Buy), reported third-quarter 2022 adjusted EPS of 13 cents, which beat the Zacks Consensus Estimate by a stupendous 550%. Revenues of $114 million outpaced the consensus mark by 2.7%.
Orthofix Medical has an estimated next-year growth rate of 58.97%. OFIX’s earnings surpassed estimates in the trailing three quarters and missed in one, the average being 129.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Merit Medical, currently carrying a Zacks Rank of 2, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.