It has been about a month since the last earnings report for NuVasive (NUVA - Free Report) . Shares have added about 8.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NuVasive due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
NuVasive reported second-quarter 2018 adjusted earnings per share (EPS) of 58 cents, reflecting a 26.1% rise from the year-ago quarter. The bottom line, however, remained in line with the Zacks Consensus Estimate.
On a reported basis, second-quarter 2018 EPS was 22 cents per share, a penny ahead of the year-ago number.
Revenues in the reported quarter came in at $281.6 million, up 8.5% (up 7.7% at constant exchange rate or CER) year over year. The top line also surpassed the Zacks Consensus Estimate by 2%.
In the reported quarter, revenues at the U.S. Spinal Hardware business increased around 5.6% to $150.8 million, driven by new product launches in the United States, namely modular 3D printed titanium implants for TLIF and XLIF, Porous PEEK offerings, COHERE and COALESCE, expanded PLF implant offerings and RELINE Small Stature.
Revenues in the U.S. Surgical Support business were $74 million for the quarter under review, up 5.9% year over year. While the acquisition of SafePassage contributed $6 million to the top line, there was approximately 6% growth in the legacy services business, partially offset by the expected decline in the Biologics product line.
The international business recorded 17% growth at CER or 21% on a reported basis on solid contributions from key geographies.
In the reported quarter, adjusted gross margin was 72.8%, down 170 basis points year over year. This year-over-year contraction was the result of a slower production throughput and insourcing of SKUs at NuVasive’s West Carrollton facility.
Sales, marketing and administrative expenses rose 4.8% to $145.7 million while research and development expenses shot up 18.2% to $14.9 million. Adjusted operating margin contracted 44 bps to 15.6% in the quarter under discussion.
The company exited the second quarter with cash and cash equivalents of $70.1 million, down from $73.7 million at the end of the first quarter.
NuVasive provided an update on its guidance for 2018. The projection has been adjusted for the recent buyout of SafePassage, full-year benefits from the U.S. tax reform and suspension of the medical device tax.
The company continues to expect 2018 revenues in the range of $1.095-$1.105 billion, reflecting 4.7-5.7% organic growth (unchanged). On a reported basis, the company expects revenue growth of 6.7-7.6% (unchanged) inclusive of the recently-acquired SafePassage. The Zacks Consensus Estimate of $1.10 billion is within this guided band.
NuVasive however, declined its full-year adjusted EPS forecast to a new range of $2.37-$2.40 from the earlier prediction of $2.44-$2.47. The current Zacks Consensus Estimate of $2.45 remains outside this guided range. Additionally, adjusted operating margin for the year is anticipated at 16.7% (down from the earlier figure of 17.6%).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, NuVasive has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is equally suitable for value, growth, and momentum investors.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, NuVasive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.