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Globus Medical (GMED) Down 13.9% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Globus Medical (GMED). Shares have lost about 13.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Globus Medical due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Strong Musculoskeletal Solutions Sales Drive Globus Medical in Q1

Globus Medical reported first-quarter 2019 adjusted earnings per share (EPS) of 36 cents, missing both the Zacks Consensus Estimate and the year-ago figure by 12.2%.

On a reported basis, the company registered earnings of 33 cents per share, translating to a 15.4% decline from the year-ago quarter.

Revenue Details

First-quarter 2019 worldwide sales summed $182.9 billion, up 4.9% (up 5.7% at constant exchange rate or CER) year over year. The figure, however, lagged the Zacks Consensus Estimate of $186 million. Also, net sales totaled $713 million in the period, up 12.1% year over year.

During the quarter under review, sales generated in the United States including robotic inched up 1.3% year over year. Quarterly seasonality and longer sales cycles dampened robotic sales in the reported period.
International sales rose 23% from the year-earlier quarter (up 27.9% at CER).

Musculoskeletal solutions products generated revenues of $175.8 million, up 8.7% year over year. Enabling Technologies products revenues were $7.2 million in the quarter, representing a 44% decline from the prior-year period.

Cash Position

Globus Medical exited the first quarter with cash and cash equivalents and short-term marketable securities of $320.7 million compared with $339.8 million in 2018. For the first quarter, net cash provided by the operating activities was $39.2 million compared with $52.3 million a year ago.

2019 Guidance

The company reaffirmed its 2019 revenue and adjusted EPS guidance as follows:

Sales in 2019 are still projected to be $770 million. The Zacks Consensus Estimate for revenues is pegged at $769.8 million.

Adjusted EPS for 2019 is once again expected at $1.72. The Zacks Consensus Estimate for the metric is currently stands at $1.71 per share.

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 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 indicates a downward shift. 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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