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NuVasive (NUVA) Up 11% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for NuVasive (NUVA - Free Report) . Shares have added about 11% 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 drivers.

Overall Growth Drives NuVasive's (NUVA - Free Report) Earnings in Q3

NuVasive 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.

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%).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -18.42% due to these changes.

VGM Scores

Currently, NuVasive has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise NuVasive has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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