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Solid Global Business Aids NuVasive Amid Pricing Pressure

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On Jan 2, we issued an updated research report on NuVasive, Inc. (NUVA - Free Report) . The company continues to witness strength in the global business. However, persistent decline in product prices due to intense competition in the spine market is a concern. NuVasive currently carries a Zacks Rank #3 (Hold).

In the past three months, NuVasive underperformed the industry it belongs to. The stock has declined 29.8% compared with the industry’s 10% fall.

According to NuVasive, the international region holds tremendous growth opportunity for the company. In the third quarter of 2018, NuVasive’s international business recorded 10.7% growth at CER.

The company demonstrated double-digit growth in EMEA and Asia-Pacific regions, driven primarily by solid MIS adoption in Germany and Japan. Overall, NuVasive is confident about its ability to expand shares by double across key international markets from the roughly 4.5% share it presently holds in the next few years.

We are also upbeat about the company’s U.S. surgical support business that is delivering robust performance in recent times. Growth in the segment can be attributed to Biotronic that was acquired in July 2016. With its integration on track, the company witnesses the benefits of building an up-scale service business. Management believes that the addition of Biotronic enhanced its service offerings and is delivering greater integration across its procedurally integrated portfolio.

Meanwhile, pricing continues to be a major headwind as NuVasive experiences declining prices for products due to increasing competition in the spine market; pricing pressure experienced by hospital customers from managed care organizations, insurance providers as well as other third-party payers; and higher market power of hospital customers as the medical device industry consolidates.

The company experienced adverse impacts stemming from pricing pressure of around negative 2% in the last reported quarter.

Further, escalating costs and expenses are other concerns.

Key Picks

Some better-ranked stocks in the broader medical space are Veeva Systems (VEEV - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Surmodics, Inc (SRDX - Free Report) .

Veeva Systems’ long-term earnings growth rate is estimated at 19.5%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Integer Holdings, with a Zacks Rank #1, has an earnings growth rate of 31.2% for the first quarter of 2019.

Surmodics’ long-term earnings growth rate is projected at 10%. The stock carries a Zacks Rank of 2 (Buy).

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