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NuVasive (NUVA) Q3 Earnings Lag Estimates, Revenues Top Mark

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NuVasive, Inc. (NUVA - Free Report) reported third-quarter 2018 adjusted earnings per share (EPS) of 56 cents, reflecting a 9.8% rise from the year-ago quarter. The bottom line, however, fell short of the Zacks Consensus Estimate of 63 cents per share.

On a reported basis, third-quarter 2018 EPS was 30 cents, a huge decline from the year-ago period’s 64 cents.

Revenues in the reported quarter came in at $271.3 million, up 9.8% (up 10.2% at constant exchange rate or CER) year over year. The top line also surpassed the Zacks Consensus Estimate by 2%.

In the quarter under view, revenues at the U.S. Spinal Hardware business increased around 7% to $146.1 million, driven by product launches in the United States, namely modular 3D printed titanium implants for TLIF and XLIF, Porous PEEK offerings, expanded PLF implant offerings and RELINE Small Stature.

NuVasive, Inc. Price, Consensus and EPS Surprise

NuVasive, Inc. Price, Consensus and EPS Surprise | NuVasive, Inc. Quote

Revenues in the U.S. Surgical Support business were $72.6 million for the quarter under review, up 17.1% year over year, driven by strong services business and a better-than-expected performance in Biologics. Excluding the $5 million contribution from the SafePassage acquisition, the organic U.S. Surgical Support revenues grew 10%.

The international business recorded revenues of $52.7 million, 10.4% growth at CER or 8.5% on a reported basis on solid contributions from key geographies.

In the reported quarter, adjusted gross margin was 72.8%, down 70 basis points year over year.Adjusted operating profit dipped 2.4% to $42.3 million. Accordingly, adjusted operating margin contracted 190 basis points to 15.6%.

The company exited the third quarter with cash and cash equivalents of $75.1 million, up from $70.1 million at the end of the second quarter.

Outlook

NuVasive provided an update on its guidance for 2018. The projection has been adjusted for third-quarter results and contemplates the updated outlook of the U.S. spine market at present as compared to the figure three months back.

On an adjusted basis, the company continues to expect 2018 revenues in the range of $1.105-$1.110 billion, reflecting 7.4-7.9% growth at CER (earlier, the guided range was $1.095-$1.105, implying growth of 6.3-7.3% at CER).

However, NuVasive lowered its full-year adjusted EPS forecast to a new range of $2.15-$2.23 from the past prediction of $2.37-$2.40. The Zacks Consensus Estimate of $2.39 remains below this guided range. Additionally, adjusted operating margin for the year is anticipated within the band of 15-15.5%(down from the earlier figure of 16.7%).

Our Take

NuVasive generated revenues ahead of the Zacks Consensus Estimate while its earnings missed the consensus mark. The company registered balanced growth in both its business wings. Also, a solid show by its international business buoys optimism among investors on the stock. The company expects to see strong demand for new products as well as positive surgeon conversion efforts as its new Lateral Single-Position Surgery procedure gains traction in the market. Moreover, we are upbeat about the recently-integrated SafePassage business.

On the flip side, the trimmed earnings as well as operating margin view was disappointing.

Zacks Rank & Key Picks

NuVasive carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , Humana Inc. (HUM - Free Report) and Inogen, Inc. (INGN - Free Report) .

Henry Schein is expected to release third-quarter 2018 results on Nov 6. The Zacks Consensus Estimate for adjusted EPS is $1.01 and for revenues, $3.35 billion. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Humana is likely to release third-quarter 2018 results on Nov 7. The Zacks Consensus Estimate for the quarterly EPS is pegged at $4.29 and for revenues, stands at $13.97 billion. The stock holds a Zacks Rank of 2.

Inogen is slated to release third-quarter 2018 results on Nov 6. The Zacks Consensus Estimate for EPS is projected at 52 cents and for revenues, at $91.08 million. The stock sports a Zacks Rank #1 (Strong Buy).

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