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Wright Medical (WMGI) Beats on Q2 Earnings, Raises '18 View

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Wright Medical Group N.V. (WMGI - Free Report) reported second-quarter 2018 adjusted loss of 3 cents, narrower than the Zacks Consensus Estimate of a loss of 7 cents. Notably, the company reported loss per share of 7 cents in the year-ago quarter.

Second-quarter revenues came in at $205.4 million, which beat the Zacks Consensus Estimate by 5.7%. Revenues also improved 14.3% year over year.

The stock has a Zacks Rank #2 (Buy).

Segment Details

Lower Extremities

This segment posted worldwide revenues of $75.1 million, up 8.7% year over year. Sales in the United States increased 9.4% to $59.5 million on a year-over-year basis. International sales totaled $15.7 million, up 6.2% year over year.

The upside can be attributed to 15% growth in total ankle and a return to growth in the core lower extremity business.

Management expects the launch of the PROstep Minimally Invasive Surgery System in the third quarter to provide further momentum. The company also received PMA approval for AUGMENT Injectable Bone Graft and initiated launch activities in the United States. 

Wright Medical Group N.V. Price, Consensus and EPS Surprise

 

Upper Extremities

Revenues in this segment totaled $99.3 million, up 23.3% from the prior-year quarter’s level. In the United States, sales were up 22% on a year-over-year basis to $70.2 million. Internationally, the segment raked in revenues worth $29.1 million, up 26.8% year over year.

Per management, growth was driven by 24% growth in the company’s U.S. shoulder business. The quarter also witnessed strong contribution from flagship products like SIMPLICITI shoulder and PERFORM Reversed Glenoid.

Management is optimistic about the BLUEPRINT acquisition, which is expected to boost growth in the shoulder line of products till 2019.

Biologics

Worldwide Biologics sales were $26.8 million, up 9.9% on a year-over-ear basis. While international revenues in the segment rose 28.3% to $6.6 million, U.S. sales were $20.2 million, up 5% year over year.

Sports Med & Other

This segment posted worldwide sales of $4.1 million, down 26.9% on a year-over-year basis. The segment’s U.S. sales declined 4.2% to $1.7 million, while international sales sunk 37.4% to $2.4 million.

Margin Analysis

In the quarter under review, gross profit totaled $159.8 million, up 12.9% year over year. Gross margin was 73% of net revenues, which contracted 580 bps from the year-ago quarter’s level.

Selling, general and administrative expenses were $140.8 million, up 7.7% year over year.

Research and development expenses were $14.7 million, up 16.9% year over year.

Net operating expenses in the second quarter of 2018 were $161.5 million, up 7.4% year over year.

Guidance Raised

Wright Medical increased revenue guidance in the band of $808-$820 million, significantly higher than the previous guidance of $800-$812 million. This represents growth of 10-12% on a constant-currency basis. For 2018, the Zacks Consensus Estimate for revenues is pegged at $810.8 million, within the guidance.

The company expects 2018 adjusted loss per share within 14-21 cents, narrower than the previous guidance of 16-23 cents. The Zacks Consensus Estimate for the same is pinned at a loss of 13 cents, a bit lower than the projected range.

Full-year adjusted EBITDA is anticipated in the range of $106-$113 million, much higher than the previous range of $104-$111 million. The guidance has approximately 0.5% cushion from foreign currency exchange rates.

In Conclusion

Wright Medical exited the second quarter on a promising note. While the year-over-year loss has narrowed, revenues have ticked up. Solid performance by the upper and lower extremity segments buoy optimism. The recent FDA approval of the AUGMENT Injectable Bone Graft is also a major positive. The company has also consistently witnessed strong growth in the Perform Reversed Glenoid platform. Further, continued contribution from the company’s SIMPLICITI shoulder system is noteworthy. Management is optimistic about recent acquisition of BLUEPRINT. Wright Medical also launched INVISION Total Ankle Revision System.

On the flip side, the company’s rising operating expenses is a concern. Soft show by the sports business is discouraging. Distribution issues in Europe and Asia and foreign currency volatility add to the woes. Increased costs related to product launch and re-building infrastructure is expected to keep the margins under pressure.

Earnings Results of Other MedTech Majors at a Glance

A few other top-ranked stocks in the broader medical space, which reported solid earnings this season, are Intuitive Surgical, Inc (ISRG - Free Report) , Chemed Corporation (CHE - Free Report) and Illumina, Inc (ILMN - Free Report) .

While Intuitive Surgical and Illumina sport a Zacks Rank #1 (Strong Buy), Chemed carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported adjusted earnings of $2.76 per share in the second quarter of 2018, which beat the Zacks Consensus Estimate of $2.48. Adjusted earnings improved 38% year over year.

Chemed's second-quarter 2018 adjusted earnings per share were $2.81, up 30.7% from the year-ago quarter’s tally. The figure also surpassed the Zacks Consensus Estimate of $2.68.

Illumina reported adjusted earnings of $1.43 per share, beating the Zacks Consensus Estimate of $1.11.

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