NuVasive Inc. Earnings: Margins Shrink Again

The Cheat Sheet

NuVasive, Inc. reported a drop to a loss in the fourth quarter driven by higher costs. NuVasive is a medical device company focused on the design, development, and marketing of products for the surgical treatment of spine disorders.

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NuVasive Earnings Cheat Sheet for the Fourth Quarter

Results: Reported a loss of $10 million (24 cents per diluted share) in the quarter. The medical instruments and supplies company had net income of $61.9 million or $1.39 per share in the year-earlier quarter.

Revenue: Rose 16.2% to $150.2 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: NuVasive, Inc. reported adjusted net income of 27 cents per share. By that measure, the company beat the mean estimate of 11 cents per share. Analysts were expecting revenue of $148.4 million.

Quoting Management: Alex Lukianov, Chairman and Chief Executive Officer, said, “Our financial performance in 2011 attests to the exceptional execution of our market-share taking strategy, which drove revenue growth of 13% within a challenged US spine market that did not grow. I am very proud of the NuVasive family’s accomplishments to establish us as one of the top global spine companies with innovative surgical solutions that address the entire spine. As the spine market shifts toward more minimally invasive procedures, NuVasive is ready to further penetrate the market and we expect to again lead the industry in market share gains in 2012. Normalized for the full year impacts of certain 2011 events, we expect to improve the operating profile of our business in 2012, with a pre-tax earnings growth rate nearly two times the rate of revenue growth. Through the breadth of our procedural offerings, increased global expansion, and continued focus on superior clinical outcomes, we are well positioned to achieve our longer term goal of becoming the #3 company in spine with $1 billion in revenue and a greatly improved profitability profile.”

Key Stats:

The company has seen double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 14.6%, with the biggest boost coming in the fourth quarter of the last fiscal year when revenue rose 20.9% from the year earlier quarter.

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 6.8 percentage points from the year-earlier quarter to 75.3%. Over that time, margins have contracted on average 3.7 percentage points per quarter on a year-over-year basis.

The company has now surpassed analyst estimates for four quarters in a row. It beat the mark by one cent in the third quarter, by 2 cents in the second quarter, and by 3 cents in the first quarter.

Looking Forward: Expectations for the first quarter of the next fiscal year have not changed from 8 cents. The average estimate for the fiscal year has risen to 56 cents per share from 55 cents in the past month.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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