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Wright Medical (WMGI) Earnings Beat in Q2, Guidance Slashed

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Wright Medical Group N.V. (WMGI - Free Report) delivered second-quarter 2019 adjusted earnings per share (EPS) of 2 cents, which beat the Zacks Consensus Estimate by a penny. The company had reported adjusted loss of 3 cents per share in the year-ago quarter.

The Zacks Rank #3 (Hold) company’s second-quarter revenues totaled $229.7 million, which missed the Zacks Consensus Estimate of $233.5 million. The top line however improved 11.8% year over year.

Segment Details

Lower Extremities

This segment reported worldwide revenues of $83.8 million, up 11.5% year over year.

Revenues in the United States increased 12.4% to $66.8 million on a year-over-year basis. International revenues totaled $17 million, up 8.3%.

Wright Medical Group N.V. Price, Consensus and EPS Surprise

 

Wright Medical Group N.V. Price, Consensus and EPS Surprise

Wright Medical Group N.V. price-consensus-eps-surprise-chart | Wright Medical Group N.V. Quote

Upper Extremities

Revenues at this segment totaled $111.3 million, up 12.1% from the prior-year quarter’s level.

In the United States, revenues increased 14.2% on a year-over-year basis to $80.1 million. Internationally, the segment reported revenues worth $31.2 million, up 6.9% year over year.

Biologics

Biologics revenues amounted to $29.9 million in the quarter under review, up 11.6% on a year-over-year basis.

While international revenues at the segment declined 3.8% to $6.3 million, U.S. revenues summed $23.6 million, up 16.6% year over year.

Sports Med & Other

At this segment, net revenues came in at $4.7 million, up 13.7% on a year-over-year basis.

The segment’s U.S. revenues increased 16.1% to $2 million, while international revenues shot up 12.1% to $2.7 million.

Margin Analysis

In the quarter under review, gross profit totaled almost $181.4 million, up 13.5% year over year. Gross margin was 79% of net revenues, which expanded 100 bps from the year-ago quarter.

Selling, general and administrative expenses were $152.1 million, up 8% year over year.

Research and development expenses amounted to $18.8 million, up 27.9% year over year.

Operating income in the second quarter of 2019 was $2.7 million against operating loss of $1.7 million in the prior-year quarter.

Guidance Slashed

For 2019, Wright Medical expects revenues within $925 million to $930 million, lower than the earlier projected band of $954 million to $966 million. The Zacks Consensus Estimate is pegged at $962.1 million, much higher than the current range.

Notably, the guidance calls for constant currency growth of 12% and organic growth of 101%. Additionally, Wright Medical expects a negative impact of foreign currency on its 2019 sales.

Adjusted EPS is projected within 15-20 cents, lower than the earlier communicated range of 17-25 cents. The Zacks Consensus Estimate is pinned at 22 cents, above the guided range.

Conclusion

Wright Medical exited the second quarter on a mixed note. Solid performance by the Upper and the Lower Extremities segments buoys optimism. Further, consistent growth in PERFORM Reversed glenoid and robust contributions from the SIMPLICITI shoulder system continue to impress.  Wright Medical is likely to gain from the launch of REVIVE revision shoulder system as well. Furthermore, management is confident about the recent acquisition of Cartiva. Expansion is gross margin is heartening as well.

Meanwhile, the company’s increasing operating expenses raise concern. International sales at the Biologics unit declined in the quarter. A slashed guidance for 2019 is worrisome. The company expects foreign currency volatility to mar its top line in 2019.

Earnings of MedTech Majors at a Glance

A few top-ranked companies, which posted solid results this earnings season, are Stryker Corporation (SYK - Free Report) , Baxter International Inc. (BAX - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) . While Stryker and Baxter each carry a Zacks Rank #2 (Buy), Intuitive Surgical sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stryker delivered second-quarter 2019 adjusted EPS of $1.98, beating the Zacks Consensus Estimate by 2.6%. Its revenues of $3.65 billion surpassed the Zacks Consensus Estimate by 1.4%.

Baxter delivered second-quarter 2019 adjusted EPS of 89 cents, which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. Its revenues of $2.84 billion outpaced the consensus estimate of $2.79 billion by 1.9%.

Intuitive Surgical reported second-quarter 2019 adjusted EPS of $3.25, which beat the Zacks Consensus Estimate of $2.85. Its revenues of $1.1 billion surpassed the Zacks Consensus Estimate of $1.03 billion.

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