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Wright Medical (WMGI) Down 9.3% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Wright Medical Group . Shares have lost about 9.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Wright Medical due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Wright Medical Reports Q3 Loss, Gains From Extremities Business

Wright Medical reported third-quarter 2018 adjusted loss of 9 cents, narrower than the Zacks Consensus Estimate of a loss of 15 cents. Notably, the company had reported loss of 16 cents in the year-ago quarter.

Third-quarter revenues came in at $194.1 million, which beat the Zacks Consensus Estimate by 4.2%. Revenues improved 13.8% year over year.

Segment Details

Lower Extremities

This segment posted worldwide revenues of $71.1 million, up 8.8% year over year. Sales in the United States increased 12% to $57.6 million on a year-over-year basis. International sales totaled $13.5 million, down 3.3% year over year.

Upper Extremities

Revenues at the segment totaled $91 million, up 19.8% from the prior-year quarter’s level. In the United States, sales were up 19.2% on a year-over-year basis to $65.3 million. Internationally, the segment raked in revenues worth $25.7 million, up 21.2% year over year.

Biologics

Worldwide Biologics sales were $27.2 million, up 14.1% on a year-over-year basis. While international revenues in the segment rose 26.1% to $6.5 million, U.S. sales were $20.7 million, up 10.8% year over year.

Sports Med & Other

The segment posted worldwide sales of $4.8 million, down 9.8% on a year-over-year basis. The segment’s U.S. sales declined 2.2% to $1.9 million, while international sales fell 14.5% to $2.8 million.

Margin Analysis

In the quarter under review, gross profit totaled $139.2 million, up 5.9% year over year. Gross margin was 77.2% of net revenues, which contracted 30 basis points (bps) from the year-ago quarter.

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

Research and development expenses were $14.7 million, up 15.3% year over year.

Adjusted operating expenses in the third quarter of 2018 were $153.1 million, up 6.8% year over year.

Guidance

Wright Medical raised the revenue guidance to $825-$828 million from the previous $812-$822 million. This represents growth of 11-12% on a constant-currency basis.

The company expects 2018 adjusted loss per share within 8-3 cents, narrower than the previous guidance of 14-21 cents.

Full-year adjusted EBITDA is anticipated in the range of $110-$116 million, higher than the prior range of $106-$113 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 60.71% due to these changes.

VGM Scores

At this time, Wright Medical has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Wright Medical has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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