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Why Is NuVasive (NUVA) Down 3.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for NuVasive (NUVA - Free Report) . Shares have lost about 3.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is NuVasive due for a breakout? 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.

NuVasive Q1 Earnings Top Estimates, Margins Strong

NuVasive, Inc. delivered first-quarter 2019 adjusted earnings per share (EPS) of 53 cents, reflecting a 32.5% surge from the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate by 29.3%. On a reported basis, first-quarter 2019 EPS came in at 18 cents, highlighting a huge rebound from the year-ago loss of 53 cents per share.

Revenues in the first quarter came in at $274.8 million, up 5.5% on a reported basis (up 6.4% at constant exchange rate or CER) year over year. The top line also beat the Zacks Consensus Estimate by a margin of 2.2%.

Geographical & Segmental Details

In the quarter under review, revenues at the U.S. Spinal Hardware business increased 4.5% year over year to $147.8 million. This revenue upside was contributed by a strong traction of product introductions coupled with new surgeon conversions.

 Revenues in the U.S. Surgical Support business were $72.2 million in the first quarter, up 3.7% year over year. This uptrend was driven by 15% growth in NuVasive Clinical Services revenues.

Within the Biologics segment, there was 6% decline in revenues from the year-ago quarter, even though it was in line with internal expectations. This franchise continues to see higher volumes, offset by a falling average selling price as a result of shift from Osteocel to lower cost osteobiologics.

In the first quarter, the company registered international revenues amounting to $54.8 million, reflecting 16% year-over-year growth at CER. The EMEA region witnessed a solid uptick, driven by a solid contribution from the U.K., Southern Europe and Benelux. The execution in the U.K. was boosted by wins across seven new key accounts and the tender secured last year in Germany and Benelux that produced revenues in the quarter. Revenues earned from the Asia-Pacific region grew on solid contributions from Japan and Australia and New Zealand.
 
Margin Details

In the reported quarter, gross profit improved 7.2% year over year to $200.3 million. Gross profit margin expanded 122 basis points (bps) to 72.9%. Adjusted operating profit jumped 47.9% from the year-ago period to $37.6 million. Accordingly, adjusted operating margin grew 393 bps to 13.7% in the quarter under review.

Operational Update

The company exited the first quarter of 2019 with cash and cash equivalents and short-term marketable securities of $491.7 million, up from $362.2 million at the end of 2018. Net cash provided by operating activities at the end of the first quarter was $24.5 million compared with $36.4 million a year ago.

Guidance for 2019

NuVasive has reiterated its outlook for 2019. The revenues are intact in the range of $1.14-$1.16 billion. The Zacks Consensus Estimate for 2019 revenues is pegged at $1.15 billion, lying within the company’s guided range. Adjusted EPS for 2019 is also retained in the $2.20-$2.30 range. The Zacks Consensus Estimate for this metric stands at $2.55, above the higher-end of the guided range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, NuVasive has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, 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 B. 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. Notably, NuVasive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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