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Globus Medical (GMED) Q1 Earnings Beat Estimates, Margins Up

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Globus Medical, Inc. GMED reported first-quarter 2021 adjusted earnings per share (EPS) of 49 cents, beating the Zacks Consensus Estimate by 36.1%. The metric also improved 68.9% from the year-ago figure.

Adjusted EPS excludes certain non-recurring expenses like amortization of intangibles and acquisition-related costs.

Without the adjustments, the company registered GAAP EPS of 44 cents per share, reflecting a 76% surge from the year-ago quarter’s EPS.

Revenues

First-quarter 2021 worldwide sales totaled $227.3 million, up 19.3% year over year (up 18.7% at constant exchange rate or CER). The reported figure surpassed the Zacks Consensus Estimate by 15%. The year-over-year growth in the top line was led by strength in Enabling Technologies and U.S. Spine.

Quarterly Details

Sales generated in the United States during the quarter under review improved 22% year over year to $193.3 million, driven by the continued strength in the U.S. Spine business as well as higher INR revenues stemming from additional capital sales.

International sales of $34 million improved 5.9% from the year-earlier quarter (up 2.1% at CER). Growth in robotics was the key contributing factor in year-over-year improvement. However, the growth was being partially offset by declines in Japan. Also, the international Spinal Implant business was flat during the quarter.

Globus Medical, Inc. Price, Consensus and EPS Surprise

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

Musculoskeletal Solutions products generated revenues of $212.4 million, up 16.4% year over year. Enabling Technologies product revenues of $14.9 million in the quarter reflected an 85.8% surge from the prior-year figure.

Margin

Gross profit in the reported quarter rose 21.6% year over year to $172.3 million. Gross margin expanded 143 basis points (bps) to 75.8% on a 13% rise in cost of goods sold to $55 million.

Selling, general and administrative expenses in the reported quarter were $97.9 million, up 4.7% from the year-ago quarter. Research and development expenses declined 3.1% to $14.9 million.

Overall adjusted operating profit was $59.5 million, reflecting a surge of 81.6% year over year. Adjusted operating margin in the reported quarter was 26.2%, showing an 898 basis-point expansion from the year-ago period.

Cash Position

Globus Medical exited the first quarter of 2021 with cash and cash equivalents, and short-term marketable securities of $403.6 million compared with $426.7 million at the end of the fourth quarter 2020.

Notably, the company is debt free.

Cumulative net cash provided by operating activities at the end of first-quarter 2021 was $63.6 million compared with the year-ago $42.3 million.

2021 Guidance

The company has raised its full-year 2021 guidance.

The company now expects full-year net sales at $925 million, calling for 5.1% growth from the previous figure of $880 million. The Zacks Consensus Estimate for the same is currently pegged at $882.4 million.

The company now expects adjusted EPS in 2021 of $1.89, suggesting 3.3% growth from the previous figure of $1.83. The Zacks Consensus Estimate for the same is currently pegged at $1.84.

Our Take

Globus Medical exited the first quarter of 2021 with better-than-expected earnings despite pandemic-led business disruptions. The robust top-line growth along with improvements in the company’s U.S. revenues led by the U.S. spine and Enabling Technologies businesses is impressive. Pull-through from robotics, contributions from product introductions and resurgence in biologics business drove first-quarter growth. Expansion in both margins looks encouraging as well. Further, the company has raised full-year 2021 guidance.

However, rise in operating cost is discouraging. The international spinal implant business was flat during the reported quarter due to headwinds from Japan. Stiff competition and foreign-exchange impacts persist.

Zacks Rank and Other Key Picks

Globus Medical currently carries a Zacks Rank #2 (Buy).

A few similar-ranked stocks in the broader medical space are Boston Scientific Corporation BSX, Illumina, Inc. ILMN and HCA Healthcare, Inc. HCA. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boston Scientific reported first-quarter 2021 adjusted EPS of 37 cents, beating the Zacks Consensus Estimate by 23.3%. Net revenues of $2.75 billion outpaced the consensus estimate by 5.3%.

Illumina reported first-quarter 2021 adjusted EPS of $1.89, beating the Zacks Consensus Estimate by 38.9%. Revenues of $1.09 billion outpaced the consensus estimate of $1.08 billion.

HCA Healthcare reported first-quarter 2021 adjusted EPS of $4.14, surpassing the Zacks Consensus Estimate by 23.6%. Net revenues of $14 billion exceeded the Zacks Consensus Estimate by 2.2%.

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