Globus Medical (GMED) Down 5.8% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Globus Medical (GMED). Shares have lost about 5.8% 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 drivers.
Globus Medical Q4 Earnings Surpass, Margins Down
Globus Medical reported adjusted earnings per share of 60 cents in the fourth quarter of 2023, beating the Zacks Consensus Estimate by 1.7%. The metric increased 1.7% 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 diluted earnings per share of 11 cents, up from the year-ago figure of 49 cents.
For the full year, adjusted earnings were $2.32 per share, 12.6% up from the year-ago period. The metric came in line with the Zacks Consensus Estimate.
Revenues
Worldwide sales in the quarter under review registered a remarkable increase of 124.6% year over year to $616.5 million. The reported figure exceeded the Zacks Consensus Estimate by 0.7%.
Excluding the impacts of the NuVasive merger, legacy Globus revenues were $304.1 million, an increase of 10.8 % from last year’s comparable period.
Full-year revenues were $1.57 billion, reflecting a 53.3% increase from the year-ago period (same at constant currency basis or CER). The figure topped the Zacks Consensus Estimate by 0.6%.
Geographic Details
During the quarter under review, net sales generated in the United States increased 110.5% year over year (same at CER) to $490.8 million.
Across international markets, revenues surged 204.6% (up 198.9%% at CER) to $125.7 million.
Product Category
Musculoskeletal Solutions generated revenues of $583.8 million, up 138.3% year over year.
Legacy Globus musculoskeletal sales were $274 million, up 11.8% from the prior-year quarter’s levels. Growth was led by the company’s U.S. and international spine businesses and continued share growth within trauma.
Enabling Technologies generated revenues of $32.7 million in the fourth quarter of 2023, an improvement of 10.9% from the prior-year figure.
Legacy Globus enabling technologies revenues were $30.1 million, an increase of 2.1% from the last year’s figure. The upside can be attributed to a record number of units placed.
Margins
Gross profit in the reported quarter rose 72.2% year over year to $351 million. However, the gross margin contracted 1734 basis points (bps) to 56.9% on a 276.1% surge in the cost of sales to $265.5 million.
SG&A expenses in the reported quarter totaled $244.7 million, up 107.3% from the year-ago quarter’s levels. Research and development expenses increased 167.9% to $52.2 million.
The quarter’s adjusted operating profit fell 18.5% to $54.1 million from the year-ago quarter’s figure. The adjusted operating margin contracted 1539 bps in the quarter to 8.8%.
Cash Position
Globus Medical exited the fourth quarter of 2023 with combined cash and cash equivalents and short-term marketable securities of $517.8 million compared with $446.1 million at the end of 2022.
Cumulative net cash provided by operating activities at the end of the fourth quarter was $243.5 million compared with the year-ago figure of $178.5 million.
2024 Guidance
GMED initiated its outlook for 2024.
The full-year net sales are projected in the band of $2.450 billion-$2.475 billion. The Zacks Consensus Estimate is currently pegged at $2.50 billion.
The company’s adjusted EPS guidance for 2024 is in the range of $2.68-$2.70. The Zacks Consensus Estimate is pegged at $2.65.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -7.03% due to these changes.
VGM Scores
At this time, Globus Medical has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 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, Steris (STE), has gained 0.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
STERIS reported revenues of $1.4 billion in the last reported quarter, representing a year-over-year change of +14.8%. EPS of $2.22 for the same period compares with $2.02 a year ago.
STERIS is expected to post earnings of $2.43 per share for the current quarter, representing a year-over-year change of +5.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.3%.
STERIS has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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