Bear of the Day: NuVasive (NUVA)
NuVasive NUVA delivered adjusted earnings per share (EPS) of 43 cents in fourth-quarter 2022, up 7.5% year over year. However, the figure lagged the Zacks Consensus Estimate by 12.2%.
The one-time adjustments include expenses associated with certain business transition costs and European medical device regulations.
GAAP EPS of 42 cents compared favorably with the year-ago loss of 71 cents. In the full year, adjusted EPS were $1.98, up 17.9% from the year-ago period’s levels. However, the figure missed the Zacks Consensus Estimate by 2.9%.
Total Revenues
Revenues in the fourth quarter totaled $305.4 million, up 1.11% year over year on a reported basis and 4.8% at a constant exchange rate or CER. The top line, however, missed the Zacks Consensus Estimate by 1.8%.
Fourth quarter total net sales were driven by further adoption of new products and solid procedural volumes in the United States.
Total revenues for 2022 were $1.20 billion, up 5.5% from the year-ago period’s levels. The figure lagged the Zacks Consensus Estimate by 0.8%.
Geographical & Segmental Details
In the reported quarter, U.S. Spinal Hardware business revenues rose 4.6% year over year to $167.8 million on continued growth in the Simplify Cervical Disc and C360 portfolios.
Revenues from the U.S. Surgical Support business were $69.2 million in the fourth quarter, flat year over year. Growth was partially offset by a decline in Biologics.
International net sales for the third quarter were $68.4 million, representing a decline of 4.9% year over year (up 10.7% at CER).
EPS Downward Estimate Revisions
After this report, analysts took profit projections down from $2.15 to $1.92 for 2023. And next year saw a bigger cut from $2.54 to $2.30. Much of this was also entangled with the new merger deal.
On February 9, 2023, NuVasive and Globus Medical entered into a definitive agreement to combine the companies in an all-stock transaction. The transaction is expected to complete in the middle of 2023, subject to the approval of the companies’ shareholders, regulatory approval, and other customary closing conditions.
Here were some of the merger-related calls by analysts...
NuVasive downgraded to Equal Weight from Overweight at Wells Fargo: Analyst Vik Chopra downgraded NuVasive (NUVA) to Equal Weight from Overweight with a price target of $57.72, up from $47.00. On February 9, the company announced an agreement to combine with Globus Medical (GMED) in an all-stock transaction and the firm does not think that any of the larger spine players will be interested in bidding for NuVasive as most previous spine deals have been unsuccessful. Therefore they think the deal is unlikely to fall through.
Further, the firm believes the combination with NuVasive will be "challenging" to integrate and will distract management for the foreseeable future. Wells Fargo also points to "vastly different" cultures of the companies, and notes that prior spine deals have not created value.
Globus Medical downgraded to Underperform from Buy at BofA: Analyst Craig Bijou downgraded Globus Medical (GMED) to Underperform from Buy with a price target of $63, down from $83, after the company announced an agreement to acquire NuVasive (NUVA) in an all-stock transaction that values the latter at a $3.1B enterprise value at current prices.
The deal "came as a surprise to us despite prior rumors," BofA stated, adding that it sees real risk to sales estimates due to likely dis-synergies. Though the multiple that the price represents "seems reasonable given historical valuation," BofA struggles with Globus' decision to dilute both revenue growth and margins for scale when the company has been consistently taking share year after year and does not appear to have been limited by its scale in terms of its ability to strike deals with hospitals.
Bottom line: While NUVA is a central spine surgery tech company, this deal appears questionable to investors and analysts. Take your time and DD on deciding to participate.
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