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Orthofix (OFIX) Q4 Earnings Match Estimates, Margins Decline

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Orthofix Medical Inc. OFIX reported fourth-quarter 2019 adjusted earnings per share (EPS) of 51 cents, down 8.9% year over year but in line with Zacks Consensus Estimate.

Reported EPS in the quarter came in at 60 cents, showing a year-over-year rise of 30.4%.

For 2019, adjusted EPS came in at $1.47, down 18.8% from the year-ago figure.

Revenues in the fourth quarter came in at $121.5 million, up 0.3% year over year and 0.9% at constant exchange rate or CER. The figure missed the Zacks Consensus Estimate by 1.2%.

For 2019, revenues totaled $460 million, up 1.5% (up 2.6% at CER) from the year- ago period.

Segmental Analysis

The company’s key operating segment Global Spine comprises product lines like Bone Growth Therapies, Spinal Implants, Biologics. For the quarter under review, revenues from Bone Growth Therapies totaled $50.9 million, down 3.5% year over year on a reported and CER basis.

Spinal implant revenues totaled $25.5 million, up 2% (up 2.3% at CER) year over year. Biologics recorded revenues of $16.7 million, up 4.2%, both on a reported and CER basis.

ORTHOFIX MEDICAL INC. Price, Consensus and EPS Surprise

 

ORTHOFIX MEDICAL INC. Price, Consensus and EPS Surprise

ORTHOFIX MEDICAL INC. price-consensus-eps-surprise-chart | ORTHOFIX MEDICAL INC. Quote

Revenues from Global Extremities grossed $28.3 million, up 4.1% on a reported basis (up 6.4% at CER).

Margin Details

In the fourth quarter of 2019, gross profit fell 0.2% year over year to $95.3 million. However, gross margin contracted 39 basis points (bps) to 78.4%. Adjusted operating profit declined 51.4% from the year-ago quarter to $0.6 million. As a result, adjusted operating margin contracted 564 bps to 5.3%.

Operational Update

Orthofix exited 2019 with cash, cash equivalents, and restricted cash of $70.4 million compared with $72.2 million at the end of the year-ago period. Cumulative cash flow from operating activities at 2019-end totaled $32 million, compared with the year-ago $49.9 million. Capital expenditures totaled $20.5 million at the end of 2019, compared with $15.3 million a year ago.

Guidance for 2020

Orthofix initiated its 2020 guidance. Revenues are projected in the band of $467-477 million. The Zacks Consensus Estimate for the same is pegged at $476.7 million. For 2020, the company’s adjusted EPS is estimated in the range of $1-1.10. The Zacks Consensus Estimate is pegged at $1.73.

For first-quarter 2020, revenues are projected in the band of $106-109 million. The Zacks Consensus Estimate for the metric is pegged at $112.3 million. The company’s adjusted EPS is projected in the band of 9-12 cents. The Zacks Consensus Estimate for the same is at 29 cents.

Our Take

Orthofix ended the fourth quarter of 2019 on a mixed note. We are upbeat about majority of the key operating segments witnessing year-over-year revenue growth. On a positive note, the recent FDA approval of the Bone Growth Therapy patient monitoring app STIM onTrack 2.1 buoys optimism. However, a decline in Bone Growth Therapies revenues and contraction in both the margins are concerning.

Zacks Rank

Orthofix currently has a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks, which reported solid results this earnings season, are Stryker Corporation SYK, Accuray Incorporated ARAY and AmerisourceBergen ABC.

Stryker delivered fourth-quarter 2019 adjusted EPS of $2.49, outpacing the Zacks Consensus Estimate by 1.2%. Revenues of $4.13 billion surpassed the consensus mark by 0.7%. The company carries a Zacks Rank #2 (Buy).

Accuray reported third-quarter fiscal 2020 adjusted EPS of a penny versus the Zacks Consensus Estimate of a loss of 7 cents. Net revenues of $98.8 million outpaced the Zacks Consensus Estimate by 0.3%. The company sports a Zacks Rank #1.

AmerisourceBergen reported first-quarter fiscal 2020 adjusted EPS of $1.76, which beat the consensus mark of $1.67 by 5.4%. The company, carrying a Zacks Rank #2, has an expected long-term earnings growth rate of 7.4%.

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