Globus Medical (GMED) Q2 Earnings Beat Estimates, Margins Dip
Globus Medical, Inc. GMED reported adjusted earnings per share (EPS) of 63 cents for the second quarter of 2023, beating the Zacks Consensus Estimate by 5%. The metric increased 12.5% year over year.
The adjusted EPS excludes certain non-recurring expenses and benefits like the amortization of intangibles, acquisition-related costs/licensingand provision for litigation among others.
Without adjustments, the company registered a GAAP EPS of 57 cents, a 7.5% increase from the year-ago figure.
Revenues
Worldwide sales in the quarter under review totaled $291.6 million, up 10.6% year over year (up 10.9% at constant exchange rate or CER). The reported figure exceeded the Zacks Consensus Estimate by 3.4%.
Quarterly Details
During the quarter under review, net sales generated in the United States increased 9% year over year to $245.5 million. Internationally, revenues increased 20.2% to $46.1 million, up 22% year over year at CER.
Through its product category, Musculoskeletal Solutions generated revenues of $256.9 million, up 9.7% year over year. Growth was led primarily by the company’s spine and trauma businesses performances.
Enabling Technologies' product revenues of $34.8 million in the quarter improved 18.2% from the prior-year figure. The significant year-over-year surge was driven by sales of the company’s E3D imaging system as well as continued robotic system penetration, primarily in the United States.
Globus Medical, Inc. Price, Consensus and EPS Surprise
Globus Medical, Inc. price-consensus-eps-surprise-chart | Globus Medical, Inc. Quote
Margin
Gross profit in the reported quarter rose 10.2% year over year to $215.1 million. However, gross margin contracted 25 basis points (bps) to 73.8% on a 11.7% rise in cost of goods sold to $76.5 million.
SG&A expenses in the reported quarter were $120.1 million, up 12.5% from the year-ago quarter. The increase reflected higher sales compensation costs, driven by volume, competitive rep conversions and higher G&A costs driven by increased legal expenses as well as bad debt expense.
Research and development expenses increased 22.7% to $21.3 million. According to Globus Medical, the increase in expenses was largely focused on Spine and Enabling Technologies and was reflective of head count growth as the company works to develop new technologies.
The quarter’s adjusted operating profit rose 3.7% to $73.7 million from the year-ago quarter. However, the adjusted operating margin contracted 167 bps in the quarter to 25.3%.
Cash Position
Globus Medical exited the second quarter of 2023 with cash and cash equivalents, and short-term marketable securities of $612.8 million compared with $504.4 million at the end of the first quarter.
Cumulative net cash provided by operating activities at the end of the second quarter was $88.3 million compared with the year-ago figure of $81.6 million.
On Feb 9, 2023, the company announced its plans to acquire the San Diego-based spine technology firm, NuVasive Inc., in an all-stock deal valued at around $3.1 billion. The transaction, which is now expected to close in the third quarter of 2023, reflects both companies’ vision to improve patient care through innovation in unmet clinical needs. Meanwhile, in May, the company received a second request from the Federal Trade Commission in connection with its review of the acquisition.
2023 Guidance
The company has updated its 2023 guidance.
With the planned purchase in the picture, full-year net sales are projected to be $1.125 billion (up from the earlier-provided expectation of $1.1 billion). The Zacks Consensus Estimate for the same is also currently pegged at $1.12 billion.
The company’s adjusted EPS guidance for 2023 was reiterated at $2.30, suggesting 11.7% growth from 2022. The Zacks Consensus Estimate for the same is pegged at $2.37 currently.
Our Take
Globus Medical exited the second quarter of 2023 with earnings and revenue beat. The robust growth of revenues in both the United States and the international market is impressive. Rapid market interest and customer demand have positioned Excelsius3D, the company’s latest addition to the Excelsius Ecosystem, as a major growth driver in 2023.
According to GMED, US Spine grew 6% in the second quarter, with notable gains across the product portfolio in biologics, MIS system, pedicle screws and 3D-printed implants. This above-market growth is driven by competitive rep productivity and robotic pull-through. In the second quarter, the company launched three new products, REFLECT, MARVEL and Ossifuse.
However, escalating costs and expenses are putting pressure on margins.
Zacks Rank and Other Key Picks
Globus Medical currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories ABT, Elevance Health, Inc. ELV and Intuitive Surgical, Inc. ISRG.
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 4.2%.
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