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Globus Medical (GMED) Lags Q4 Earnings, Beats on Revenues

Zacks Equity Research

Globus Medical, Inc. GMED reported fourth-quarter 2019 adjusted earnings per share (EPS) of 49 cents, missing the Zacks Consensus Estimate by 5.8%. However, the metric improved 13.9% from the year-ago figure.

The adjusted EPS excludes certain non-recurring expenses like litigation-related charges, amortization of intangibles and acquisition-related costs.

Without the adjustments, the company registered GAAP earnings of 44 cents per share, reflecting a 22.2% jump from the year-ago quarter.

The full-year adjusted EPS of $1.68 also lagged the Zacks Consensus Estimate by 1.2%. It, however, came in a penny higher the year-ago figure.

Globus Medical, Inc. Price, Consensus and EPS Surprise

Globus Medical, Inc. Price, Consensus and EPS Surprise

Globus Medical, Inc. price-consensus-eps-surprise-chart | Globus Medical, Inc. Quote

The fourth-quarter 2019 worldwide sales summed $211.7 million, up 8.1% (Constant currency impacts are immaterial) year on year. Revenues increased 8.2% on a day adjusted basis, with fewer selling days in Japan versus the prior-year quarter. The reported figure also outpaced the Zacks Consensus Estimate by 0.3%.

For 2019, revenues were $785.4 million, representing a 10.2% increase over 2018. Also, the revenue figure surpassed the Zacks Consensus Estimate of $784.7 million

Q4 Revenue Details

Sales generated in the United States, including robotic, improved 8.3% year over year on continued growth in Musculoskeletal business, led by strength in U.S. Spine, which has been benefiting from record recruiting of competitive representatives, as well as the implant pull-through from accounts utilizing ExcelsiusGPS systems.

Meanwhile, international sales rose 6.4% from the year-earlier quarter (same at CER).

Moreover, Musculoskeletal Solutions products generated revenues of $197.8 million, up 8.9% year over year. However, Enabling Technologies product revenues of $13.9 million in the quarter reflect a 2.7% decline from the prior-year figure.

Margin

Gross profit in the reported quarter climbed 8.6% year over year to $162.9 million. Gross margin expanded 42 basis points (bps) to 76.9% despite a 6.1% rise in cost of goods sold to $48.8 million.

Selling, general and administrative expenses in the reported quarter came in at $92.1 million, flaring up 10.2% from the year-ago quarter. Research and development expenses rose 12.6% to $15.5 million.

Operating profit grew 5.1% year over year to $55.3 million, while operating margin shrunk 72 bps to 26.1% in the quarter.

Cash Position

Globus Medical exited the year with cash and cash equivalents, and short-term marketable securities of $311.5 million compared with $339.7 million at the end of 2018. Full-year net cash provided by the operating activities was $171.9 million compared with the prior year’s $181.6 million.

2020 Guidance

The company reaffirmed its 2020 adjusted EPS guidance at $1.82. The Zacks Consensus Estimate for the metric is pegged at $1.88.The current-year revenue guidance has been reiterated at $850 million. The Zacks Consensus Estimate for the same is pegged at $853. million.

Our Take

Globus Medical posted mixed results for the December-end quarter, with earnings missing the Zacks Consensus Estimate and revenues beating the same. While Musculoskeletal Solutions registered stellar year-over-year growth, Enabling Technologies was down marginally. The global spine business demonstrated solid year-over-year improvement. The company is also optimistic about maintaining this upside in implant sales with ExcelsiusGPS technology.

Meanwhile, the gross-margin expansion buoys optimism.

Zacks Rank & Key Picks

Currently, Globus Medical carries a Zacks Rank #3 (Hold).

Some better-ranked stocks, which have reported solid results this earnings season, are Stryker Corporation SYK, STERIS plc STE and ResMed Inc. RMD.

Stryker delivered fourth-quarter 2019 adjusted EPS of $2.49, outpacing the Zacks Consensus Estimate by 1.2%. Its fourth-quarter revenues of $4.13 billion surpassed the consensus estimate by 0.7%. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

STERIS reported third-quarter fiscal 2020 adjusted EPS of $1.45, outpacing the Zacks Consensus Estimate by 1.4%. Net revenues of $774.3 million outpaced the consensus estimate by 3.3%. The company carries a Zacks Rank #2 at present.

ResMed currently holds a Zacks Rank of 2. It reported second-quarter fiscal 2020 adjusted EPS of $1.21, surpassing the Zacks Consensus Estimate by 19.8%. Its revenues of $736.2 million outpaced the consensus mark by 1.5%.

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