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Globus Medical (GMED) Gains Market Share, Cost Woes Stay

Globus Medical GMED continues to benefit from surging demand for its Musculoskeletal Solutions’ products. Meanwhile, we are worried about a challenging pricing scenario that continues to plague its business. The stock currently carries a Zacks Rank #3 (Hold).

Over the past year, shares of Globus Medical have outperformed its industry. The stock lost 27.4% compared with the 32.1% fall of the industry.

Globus Medical exited the second quarter of 2022 with better-than-expected earnings and revenues. In Q2, the company surpassed a difficult 2021 comparable of 69% revenue growth. The reported quarter also witnessed 14% sequential growth with strong performance throughout the portfolio. The company set a new monthly sales record in June, exceeding $100 million in monthly sales for the first time.

U.S. Spine reported 5% year-over-year growth against the challenging prior-year comparable of 64% growth. This was driven by competitive rep conversions and robotic pull-through. Enabling technology sales growth was robust, setting new quarterly records in domestic and international sales.

Following the initial pandemic-led downturn of the Globus Medical business, there has been a visible rebound in the company’s revenues. In the second quarter, continued market share gain within the U.S. Spine, higher sales of enabling technologies' robotic systems, new sales related to the rollout of the E3D imaging system, and growth within its trauma business contributed to growth. Internationally, revenues increased, driven by the continued global expansion of the company’s robotics portfolio.

A strong solvency position is an added positive.

Globus Medical, Inc. Price

Globus Medical, Inc. Price
Globus Medical, Inc. Price

Globus Medical, Inc. price | Globus Medical, Inc. Quote

In the second quarter, Globus Medical’s gross margin contracted 54 basis points (bps) to 74% due to a 7.2% rise in the cost of goods sold. The decline in gross profit, per Globus Medical, was due to continued freight inflation and higher product costs.

Research and development expenses rose 11.9%. These escalating expenses are building pressure on the bottom line. On the revenue front, international implant sales were essentially flat, offset by lower sales in Japan. According to the company, the ongoing declining trend in Japan is expected to continue through the third quarter.

Key Picks

A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, ShockWave Medical, Inc. SWAV, and McKesson Corporation MCK.

AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7% on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has outperformed its industry in the past year. AMN has lost 8.4% compared with the industry’s 36.3% fall.

ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.

ShockWave Medical has outperformed its industry in the past year. SWAV has gained 33.5% against the industry’s 31.4% fall over the past year.

McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13% on average. It currently carries a Zacks Rank #2 (Buy).

McKesson has outperformed its industry in the past year. MCK has gained 79.4% against the industry’s 13.4% fall.


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