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Globus Medical (GMED) Up 4.9% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Globus Medical (GMED). Shares have added about 4.9% 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 its most recent earnings report in order to get a better handle on the important drivers.

Globus Medical Q2 Earnings Beat Estimates, 2021 View Up

Globus Medical reported second-quarter 2021 adjusted earnings per share of 56 cents, beating the Zacks Consensus Estimate by 24.4%. The metric also surged a stupendous 700% from the year-ago 7 cents.

Adjusted earnings per share exclude certain non-recurring expenses like amortization of intangibles and acquisition-related costs.

Without the adjustments, the company registered GAAP earnings per share of 40 cents per share, reflecting a 90.5% surge from the year-ago quarter level.

Revenues

Second-quarter 2021 worldwide sales totaled $251.1 million, up 68.6% year over year (up 67.9% at constant exchange rate or CER). The reported figure surpassed the Zacks Consensus Estimate by 10.6%.

Pull-through from robotics, contributions from new product introductions and resurgence in the company’s biologics business drove sales in the reported quarter.

Quarterly Details

Sales generated in the United States during the quarter under review improved 71.9% year over year to $215.1 million, driven by continued strength in the U.S. Spine business as well as higher INR revenues.

International sales of $35.9 million improved 51% from the year-earlier quarter (up 47.1% at CER). Growth in robotics was the key contributing factor in the year-over-year improvement. However, the growth was being partially offset by declines in Japan. The international Spinal Implant business grew 5% during the quarter.

Musculoskeletal Solutions products generated revenues of $230.3 million, up 60.5% year over year. Enabling Technologies product revenues of $20.8 million in the quarter reflected a 281.3% surge from the prior-year figure.

Margin

Gross profit in the reported quarter rose 90.4% year over year to $187.2 million. Gross margin expanded 857 basis points (bps) to 74.6% despite a 26.1% rise in cost of goods sold to $63.8 million.

Selling, general and administrative expenses in the reported quarter were $107.3 million, up 34% from the year-ago quarter. Research and development expenses declined 60.6% to $15.5 million.

Overall adjusted operating profit was $64.4 million, reflecting an improvement from the year-ago loss of $21.2 million.

Cash Position

Globus Medical exited the second quarter of 2021 with cash and cash equivalents, and short-term marketable securities of $460.4 million compared with $403.6 million at the end of the first quarter of 2021.

Notably, the company has no debt on its balance sheet.

Cumulative net cash provided by operating activities at the end of second-quarter 2021 was $122.8 million compared with the year-ago $65.4 million.

2021 Guidance

The company has raised its full-year 2021 guidance.

The company now expects full-year net sales at $950 million, having moved up 2.7% from the previous guided figure of $925 million. The Zacks Consensus Estimate for the same is currently pegged at $931.4 million.

The company now expects adjusted earnings per share in 2021 to be $2.00, having moved up 5.8% from the previous figure of $1.89. The Zacks Consensus Estimate for the same is currently pegged at $1.90.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Globus Medical has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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 B. 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 these revisions 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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