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Globus Medical (GMED) Up 10.1% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Globus Medical (GMED). Shares have added about 10.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Strong Musculoskeletal Solutions Sales Drive Globus Medical in Q2

Globus Medical reported second-quarter 2019 adjusted earnings per share (EPS) of 41 cents, in line with the Zacks Consensus Estimate. Meanwhile, the metric missed the year-ago figure by 6.8%.

On a reported basis, the company registered earnings of 38 cents per share, reflecting a 13.6% decline from the year-ago quarter.

Revenue Details

Second-quarter 2019 worldwide sales summed $194.5 million, up 12.2% (up 12.7% at constant exchange rate or CER) year over year. The figure also exceeded the Zacks Consensus Estimate by 5.9%.

During the quarter under review, sales generated in the United States including robotic improved 10% year over year. However, quarterly seasonality and longer sales cycles partially dampened robotic sales in the reported period.

Meanwhile, international sales rose 23.3% from the year-earlier quarter (up 26.7% at CER).

Moreover, musculoskeletal solutions products generated revenues of $182.5 million, up 14.3% year over year.

However, Enabling Technologies products revenues of $12 million in the quarter represented a 12.7% decline from the prior-year period.

Cash Position

Globus Medical exited the second quarter with cash and cash equivalents and short-term marketable securities of $240.4 million compared with $320.7 million at the end of the first quarter. Year to date, net cash provided by the operating activities was $61.8 million compared with $85.6 million a year ago.

2019 Guidance Updated

The company reaffirmed its 2019 adjusted EPS guidance at $1.72, matching the current Zacks Consensus Estimate for the metric.

However, 2019 sales guidance has been raised to $775 million from $770 million predicted earlier. The Zacks Consensus Estimate for revenues is pegged at $767.5 million, lower than the company’s projection.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Globus Medical has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, 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

Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, Globus Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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