Globus Medical (GMED) Down 3.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Globus Medical (GMED). Shares have lost about 3.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Globus Medical Q3 Earnings Top Estimates, Margins Down
Globus Medical reported adjusted earnings per share of 57 cents in the third quarter of 2023, beating the Zacks Consensus Estimate by 5.6%. The metric increased 14% year over year.
The adjusted earnings per share excludes certain non-recurring expenses and benefits like the amortization of intangibles, acquisition-related costs/licensing and provision for litigation, among others.
Without adjustments, the company registered a GAAP EPS of 1 cent, down from the year-ago EPS of 47 cents.
Revenues
Worldwide sales in the quarter under review totaled $383.6 million, up 50.9% year over year. The reported figure exceeded the Zacks Consensus Estimate by 42.4%.
Excluding business from the newly acquired NuVasive, worldwide net sales totaled $281.2 million, an increase of 10.7% year over year.
Quarterly Details
During the quarter under review, net sales generated in the United States increased 42.5% year over year to $309.3 million. Internationally, revenues surged 100.2% to $74.3 million, up 96% year over year at CER.
Through its product category, Musculoskeletal Solutions generated revenues of $347.5 million, up 51% year over year. Growth was led primarily by the company’s spine and trauma businesses’ performance.
Enabling Technologies' product revenues of $27.7 million in the quarter improved 14.8% from the prior-year figure. The continued uptake of EGPS and E3D systems drove the year-over-year surge.
Margin
Gross profit in the reported quarter rose 25.6% year over year to $248.2 million. However, gross margin contracted 1306 basis points (bps) to 64.7% on a 139.6% surge in the cost of goods sold to $135.4 million.
SG&A expenses in the reported quarter totaled $156.2 million, up 46.6% from the year-ago quarter’s levels. The increased spending is primarily reflective of additional sales compensation costs from higher volume, higher benefit costs and some additional bad debt expenses.
Research and development expenses increased by 56.8% to $29.3 million. According to Globus Medical, the increase in expenses was largely due to additional headcount, primarily in the Spine and Enabling Technologies businesses.
The quarter’s adjusted operating profit fell 13.3% to $62.7 million from the year-ago quarter’s earnings per share Globus Medical exited the third quarter of 2023 with cash and cash equivalents and short-term marketable securities of $468.9 million compared with $612.8 million at the end of the second quarter.
Cumulative net cash provided by operating activities at the end of the third quarter was $138.3 million compared with the year-ago figure of $114.5 million.
2023 Guidance
The company updated its 2023 guidance.
The full-year net sales are projected to be $1.55 billion (up from previous guidance of $1.125 billion). The Zacks Consensus Estimate for the same is currently pegged at $1.13 billion.
The company’s adjusted EPS guidance for 2023 was reiterated at $2.30. The Zacks Consensus Estimate for the same is pegged at $2.29.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Globus Medical has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 these revisions 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.
Performance of an Industry Player
Globus Medical belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, Fresenius (FMS), has gained 17% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Fresenius reported revenues of $5.37 billion in the last reported quarter, representing a year-over-year change of +4.6%. EPS of $0.31 for the same period compares with $0.40 a year ago.
For the current quarter, Fresenius is expected to post earnings of $0.36 per share, indicating a change of -18.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -2.7% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Fresenius. Also, the stock has a VGM Score of B.
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Globus Medical, Inc. (GMED) : Free Stock Analysis Report
Fresenius Medical Care AG & Co. KGaA (FMS) : Free Stock Analysis Report
