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Wright Medical (WMGI) Up 1.3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Wright Medical Group (WMGI - Free Report) . Shares have added about 1.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Wright Medical due for a pullback? 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 catalysts.

Wright Medical Q1 Earnings & Revenues Top Estimates

Wright Medical Group N.V. delivered first-quarter 2019 adjusted earnings of 5 cents per share, which surpassed the Zacks Consensus Estimate by 66.7%. The company reported adjusted loss of 1 cent per share in the year-ago quarter.

First-quarter revenues totaled $230.1 million, which outpaced the Zacks Consensus Estimate by 1.6%. The top line also improved 15.9% year over year.

Segment Details

Lower Extremities

This segment reported worldwide revenues of $86.9 million, up 20.4% year over year.

Revenues in the United States increased 25.5% to $71.3 million on a year-over-year basis. International revenues totaled $15.6 million, up 1.5% year over year.

Upper Extremities

Revenues at this segment totaled $111.2 million, up 14.3% from the prior-year quarter’s level.

In the United States, revenues increased 20.8% on a year-over-year basis to $81.7 million. Internationally, the segment reported revenues worth $29.5 million, down 0.4% year over year.

Biologics

Biologics revenues amounted to $27.2 million in the quarter under review, up 16% on a year-over-year basis.

While international revenues at the segment declined 13.7% to $4.5 million, U.S. revenues summed $22.6 million, up 24.6% year over year.

Sports Med & Other

At this segment, net revenues came in at $4.9 million, down 14.3% on a year-over-year basis.

The segment’s U.S. revenues decreased 2.6% to $2.1 million, while international revenues decreased 21.3% to $2.8 million.

Margin Analysis

In the quarter under review, gross profit totaled almost $183.8 million, up 16.8% year over year. Gross margin was 79.9% of net revenues, which expanded 60 bps from the year-ago quarter.

Selling, general and administrative expenses were $153.3 million, up 11.7% year over year.

Research and development expenses amounted to $16.9 million, up 22.1% year over year.

Operating income in the first quarter of 2019 was $5.9 million against operating loss of $0.9 million in the prior-year quarter.

Guidance Reiterated

For 2019, Wright Medical issued revenue guidance in the band of $954-$966 million. The mid-point of $960 million is below the Zacks Consensus Estimate of $961.2 million. This reflects 15-17% net revenue growth on a constant-currency basis, 11-13% increase on a pro-forma constant-currency basis and 10-12% improvement on an organic constant-currency basis.

The company expects 2019 adjusted earnings per share of 17-25 cents. Notably, the mid-point of 21 cents is in line with the Zacks Consensus Estimate.

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 -63.15% due to these changes.

VGM Scores

At this time, Wright Medical has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 C. 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, Wright Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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