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Why Is Globus Medical (GMED) Up 3.9% Since Last Earnings Report?

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

Will the recent positive trend continue leading up to its next earnings release, or is Globus 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 drivers.

Strong Musculoskeletal Solutions Sales Drive Globus Medical in Q3

Globus Medical reported third-quarter 2019 adjusted earnings per share of 43 cents, in line with the Zacks Consensus Estimate. However, the metric improved 10.3% from the year-ago figure.

The adjusted EPS excludes certain non-recurring expenses like litigation-related charges, amortization of intangibles and acquisition-related costs.

Without the adjustments, the company registered GAAP earnings of 38 cents per share, reflecting an 8.6% rise from the year-ago quarter.

Revenue Details

Third-quarter 2019 worldwide sales summed $196.2 million, up 15.9% (up 16% at constant exchange rate or CER) year over year. The figure also trumped the Zacks Consensus Estimate by 5.2%.

Sales generated in the United States including robotic improved 16.9% year over year on continued pull through from robotic placements in the reported period.

Meanwhile, international sales rose 11.2% from the year-earlier quarter (up 11.3% at CER).

Moreover, Musculoskeletal Solutions products generated revenues of $182.3 million, up 11.8% year over year.
 
However, Enabling Technologies products revenues of $13.9 million in the quarter represented a 125.2% surge from the prior-year figure of $6.2 million.

Margin

Gross profit in the reported quarter rose 14.8% year over year to $150.8 million. However, gross margin contracted 77 basis points (bps) to 76.9% on a 19.9% rise in cost of goods sold to $45.4 million.

Selling, general and administrative expenses in the reported quarter were $88.5 million, up 17.7% from the year-ago quarter. Research and development expenses, however, contracted 6.6% to $14.5 million.

Operating profit grew 17.5% year over year to $47.9 million while operating margin expanded 33 bps to 24.4% in the quarter under review.

Cash Position

Globus Medical exited the third quarter with cash and cash equivalents and short-term marketable securities of $277.6 million compared with $240.4 million at the end of the second quarter. Year to date, net cash provided by the operating activities was $117.7 million compared with $137.4 million a year ago.

2019 Guidance

The company reaffirmed its 2019 adjusted EPS guidance at $1.72. The Zacks Consensus Estimate for the metric is pegged at $1.71, which lies below the company’s issued guidance.

The company, however, raised 2019 sales guidance to $783 million from $775 million. The Zacks Consensus Estimate for the same is pegged at $776.4 million, above the company’s projection.

How Have Estimates Been Moving Since Then?

Estimates review followed an upward path over the past two months.

VGM Scores

At this time, Globus Medical has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Globus 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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