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Shares of Globus Medical, Inc. GMED reached a new 52-week high of $60.73 on Nov 30, before closing the session marginally lower at $60.08. The stock has rallied 21.1% since its third-quarter 2020 earnings announcement on Oct 28.
The company is witnessing an upward trend in its stock price, prompted by its solid performance in the third quarter despite the pandemic-led business disruptions. A robust domestic spine arm also buoys optimism. Further, a steady pace of product development boosted market sentiments. However, a stiff competitive landscape and lower demand for healthcare products are concerning for the company.
Let's delve deeper.
Encouraging Q3 Performance
Globus Medical’s impressive performance in the third quarter buoys optimism. Improvement in the company’s U.S. revenues, led by the U.S. spine business, looks encouraging. Competitive recruiting and onboarding, pull through from a growing base of robotic installations, and impressive uptake from product introductions were all strong contributors to growth.
Robust growth of the Musculoskeletal Solutions, led by U.S. spinal implant business, is also impressive. The sequential uptick in Enabling Technologies revenues boosts investors’ confidence. We are upbeat about the company’s stupendous investments in its R&D wing. Globus Medical launched several products in its spine portfolio, which raises optimism on the stock.
Other Growth Drivers
Steady Pace of Product Development: Globus Medical has been recording robust demand for various products in the HEDRON line of 3D-printed interbody spacers. Further, the company launched SABLE, which is the fourth-generation expandable MIS TLIF interbody spacer. It witnessed strong demand and favorable feedback from customers.
The company is on track with the development of several enhancements to imaging, navigation and robotic (“INR”) portfolio of the Enabling Technologies business, including a cranial robotic application and an imaging system. Despite some delays in INR development efforts due to COVID-19, the company witnessed significant progress in the commercialization of various systems.
Solid Domestic Spine Arm: Globus Medical’s U.S. Spine business accelerated considerably in the first quarter, showing a continued growth trend over the past few quarters. The company launched five new products in 2020. Further, the company has seen tremendous uptake in HEDRON line of 3D printed inner body spacers and its fourth generation expandable MIS TLIF device. Adoption has been so successful that Globus Medical is currently doubling its 3D manufacturing capacity which should come online in the fourth quarter. Further the company, in November, announced the first surgeries with ExcelsiusGPS Interbody Solutions.
Competitive Landscape: Globus Medical’s operation in a highly competitive industry which includes biggies like Zimmer Biomet Holdings, Inc. ZBH, may induce headwinds. Globus Medical needs to constantly introduce or acquire new products to withstand the competitive pressure and maintain its market share in the intensely competitive musculoskeletal devices market.
Lower Demand for Healthcare Products: Globus Medical is persistently challenged by soft demand for health care products. Additionally, weak reimbursements for medical products and services may impose a downward pressure on the prices of the company’s products, and also lead to longer sales cycles and the slower adoption of new technologies, which will ultimately impact the top line.
Zacks Rank & Key Picks
Currently, Globus Medical carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space are Hologic, Inc. HOLX and ResMed Inc. RMD.
Hologic’s long-term earnings growth rate is estimated at 17.4%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ResMed’s long-term earnings growth rate is estimated at 14.5%. The company presently carries a Zacks Rank #2 (Buy).
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Hologic, Inc. (HOLX) : Free Stock Analysis Report
ResMed Inc. (RMD) : Free Stock Analysis Report
Globus Medical, Inc. (GMED) : Free Stock Analysis Report
Zimmer Biomet Holdings, Inc. (ZBH) : Free Stock Analysis Report
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