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Globus Medical (GMED) Beats Q2 Earnings & Revenue Estimates

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Globus Medical, Inc. GMED reported second-quarter 2020 adjusted earnings per share (EPS) of 7 cents, which compared favorably with the Zacks Consensus Estimate of a loss of 11 cents. However, the metric declined 13.9% from the year-ago figure.

Adjusted EPS excludes certain non-recurring expenses like amortization of intangibles and acquisition-related costs.

Without the adjustments, the company registered GAAP loss per share of 21 cents per share, reflecting a decline from the year-ago quarter’s EPS of 38 cents.

Revenues

Second-quarter 2020 worldwide sales totaled $148.9 million, down 23.4% (down 23.3% at constant exchange rate or CER) year over year. The reported figure, however, surpassed the Zacks Consensus Estimate by 49.3%.

Globus Medical, Inc. Price, Consensus and EPS Surprise

 

Globus Medical, Inc. Price, Consensus and EPS Surprise
Globus Medical, Inc. Price, Consensus and EPS Surprise

Globus Medical, Inc. price-consensus-eps-surprise-chart | Globus Medical, Inc. Quote

Quarterly Details

Sales generated in the United States during the quarter under review declined 21.8% year over year due to adverse impacts of the coronavirus pandemic. The pandemic-led impacts on sales were most pronounced in the earlier part of the quarter. However, as the quarter progressed, overall sales improved sequentially from the last reported quarter, led by the U.S. spine business. The company also noted that robotic technology maintained its momentum, which enabled the company to enter into several agreements in June and July.

International sales declined 31.2% from the year-earlier quarter (down 30.5% at CER). The primary reason for the plunge is pandemic-led business disruptions.

Musculoskeletal Solutions products generated revenues of $143.5 million, down 21.4% year over year. Enabling Technologies product revenues of $5.4 million in the quarter reflect a 54.7% plunge from the prior-year figure.

Margin

Gross profit in the reported quarter dropped 34.7% year over year to $98.3 million. Gross margin contracted a huge 1139 basis points (bps) to 65.9% on a 15.1% rise in cost of goods sold to $50.6 million.

Selling, general and administrative expenses in the reported quarter were $80.02 million, down 9.5% from the year-ago quarter. Research and development expenses, however, rose 150.6% to $39.5 million.

Operating loss in the reported quarter was $21.2 million against operating income of $46.4 million year over year.

Cash Position

Globus Medical exited the second quarter with cash and cash equivalents, and short-term marketable securities of $316.7 million compared with $276.9 million at the end of the first quarter.

Notably, the company remains debt free.

Cumulative net cash provided by operating activities at the end of the second quarter was $65.4 million compared with the year-ago $61.8 million.

2020 Guidance

Globus Medical is currently unable to predict the extent or duration of the pandemic’s impact on its financial and operating results. Accordingly, the company has not provided any financial guidance.

Our Take

Globus Medical exited the second quarter of 2020 with better-than-expected results despite pandemic-led business disruptions. The improvement in the company’s U.S. revenues led by the U.S. spine business looks encouraging. The continued momentum of robotic technology and strong uptake of the company’s HEDRON line of 3D printed inner body spacers buoy optimism. We are upbeat about the company’s stupendous investments in its R&D wing. Globus Medical launched several products in its spine portfolio, which instills investors’ confidence in the stock.

However, the dismal segmental and international performance of Globus Medical is concerning. Contraction of gross margin and the operating loss incurred in the quarter are discouraging. The company’s decision to not provide any financial guidance raises apprehensions.

Zacks Rank & Other Key Picks

Currently, Globus Medical carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and Hologic, Inc. HOLX.

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher, a Zacks Rank #2 company, reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

Hologic reported third-quarter fiscal 2020 adjusted EPS of 75 cents, surpassing the Zacks Consensus Estimate by a stupendous 108.3%. Net revenues of $822.9 million exceeded the Zacks Consensus Estimate by 37.1%. It currently sports a Zacks Rank #1.

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