Nevro Corp.  is well-poised for growth in the coming quarters, courtesy of its research and development (R&D) edge. The optimism led by a solid first-quarter 2024 performance and continued strength in its flagship Senza platform are expected to contribute further. However, stiff competition and dependence on third-party payors persist.

In the past year, this Zacks Rank #3 (Hold) stock has lost 68.4% compared with the industry’s 1.6% decline. The S&P 500 rallied 26.1% in the same time frame.

The renowned global medical device company has a market capitalization of $279.5 million. The company projects 13.8% growth for 2024 and expects to maintain its strong performance in the future. Nevro’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 28.87%.

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Let’s delve deeper.

R&D Edge: We remain optimistic as Nevro is working to strengthen Senza and discover more indications to improve patient outcomes further and increase patient access to HF10 therapy. The company unveiled several product upgrades since the original Senza system was introduced, including active anchors with better performance. NVRO is still improving Senza to increase its functionality.

Per management, there has been a continued increase in the adoption of Nevro’s newest generation SCS system, HFX iQ, since its full market launch. HFX iQ represented 58% of the company’s permanent implant procedures in the first quarter of 2024 and the adoption is likely to grow throughout 2024.

In the first-quarter earnings call, management confirmed that Nevro had entered the fast-growing SI joint fusion market through the acquisition of Vyrsa and is focused on ramping up that business. This addition of the newly acquired SI Joint Fusion business is likely to bring additional revenues in the second half of 2024.

In February 2024, Nevro announced that the FDA cleared its SI joint fusion device, which will be marketed as Nevro1, without the need to include the screw (NevroFix).

Strength in Senza: We are upbeat about Nevro's sustained strength in its main Senza platform. Nevro believes the 10 kHz therapy can be a desirable course of treatment for patients based on the analysis from the company's SENZA-Randomized Controlled Trial (RCT) and European studies, as well as the SENZA-PDN (Painful Diabetic Neuropathy) and SENZA-NSRBP (non-surgical refractory back pain) RCTs.

Per the first-quarter earnings call, 24 months of data from Nevro’s SENZA-PDN RCT demonstrated improvement in sensory function that can lower the risk of diabetes-related ulcerations and traumatic amputations for patients suffering from severe side effects of diabetes.

Strong Q1 Results: Nevro exited the first quarter of 2024 with better-than-expected results and an improvement in revenues. The company’s robust domestic revenues were also impressive. An uptick was observed in total U.S. permanent implant procedures. The strong uptake of its new-generation SCS platform, HFX iQ, was also encouraging.

The company’s restructuring initiative looks promising as it is likely to support its long-term growth and profitability. Nevro is planning additional restructuring activities later this year.

Downsides

Regulatory Requirements: Nevro’s products are subject to extensive regulations in the United States and other countries. The regulations to which the company’s products are subjected are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on Nevro’s ability to carry on or expand its operations, leading to higher-than-anticipated costs or lower-than-anticipated sales.

Stiff Competition: Nevro operates in the highly competitive and technologically dynamic medical equipment sector. One reason for the company's success is its ability to obtain a competitive advantage in the neuromodulation market by garnering broad customer acceptance of its Senza and HF10 medicines for the treatment of recognized chronic pain disorders.

Estimate Trend

Nevro has been witnessing a stable estimate revision trend for 2024. In the past 30 days, the Zacks Consensus Estimate for its loss per share has been stable at $2.12.

The Zacks Consensus Estimate for the company’s second-quarter 2024 revenues is pegged at $107.1 million, indicating a 1.6% decline from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space that have announced quarterly results are DaVita (DVA Quick QuoteDVA - Free Report) , Stryker Corporation (SYK Quick QuoteSYK - Free Report) and Universal Health Services (UHS Quick QuoteUHS - Free Report) .

DaVita, sporting a Zacks Rank of 1 (Strong Buy) at present, has an estimated long-term growth rate of 13.6%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 29.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have gained 44% compared with the industry’s 20.4% growth in the past year.

Stryker, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 10.6%. SYK’s earnings surpassed estimates in each of the trailing four quarters, with the average being 4.9%.

Stryker has gained 13.2% against the industry’s 3.1% decline in the past year.

Universal Health Services has an Earnings ESP of +2.91% and a Zacks Rank of 2, at present. UHS has an estimated earnings growth rate of 30.5% for 2024.

UHS’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 8.12%.