Globus Medical (GMED) Q3 Earnings Top Estimates, Margins Down
Globus Medical, Inc. GMED reported adjusted earnings per share (EPS) of 57 cents in the third quarter of 2023, beating the Zacks Consensus Estimate by 5.6%. The metric increased 14% year over year.
The adjusted EPS excludes certain non-recurring expenses and benefits like the amortization of intangibles, acquisition-related costs/licensing and provision for litigation, among others.
Without adjustments, the company registered a GAAP EPS of 1 cent, down from the year-ago EPS of 47 cents.
Revenues
Worldwide sales in the quarter under review totaled $383.6 million, up 50.9% year over year. The reported figure exceeded the Zacks Consensus Estimate by 42.4%.
Excluding business from the newly acquired NuVasive, worldwide net sales totaled $281.2 million, an increase of 10.7% year over year.
Quarterly Details
During the quarter under review, net sales generated in the United States increased 42.5% year over year to $309.3 million. Internationally, revenues surged 100.2% to $74.3 million, up 96% year over year at CER.
Through its product category, Musculoskeletal Solutions generated revenues of $347.5 million, up 51% year over year. Growth was led primarily by the company’s spine and trauma businesses’ performance.
Enabling Technologies' product revenues of $27.7 million in the quarter improved 14.8% from the prior-year figure. The continued uptake of EGPS and E3D systems drove the year-over-year surge.
Margin
Gross profit in the reported quarter rose 25.6% year over year to $248.2 million. However, gross margin contracted 1306 basis points (bps) to 64.7% on a 139.6% surge in the cost of goods sold to $135.4 million.
SG&A expenses in the reported quarter totaled $156.2 million, up 46.6% from the year-ago quarter’s levels. The increased spending is primarily reflective of additional sales compensation costs from higher volume, higher benefit costs and some additional bad debt expenses.
Globus Medical, Inc. Price, Consensus and EPS Surprise
Globus Medical, Inc. price-consensus-eps-surprise-chart | Globus Medical, Inc. Quote
Research and development expenses increased 56.8% to $29.3 million. According to Globus Medical, the increase in expenses was largely due to additional headcount, primarily in the Spine and Enabling Technologies businesses.
The quarter’s adjusted operating profit fell 13.3% to $62.7 million from the year-ago quarter’s figure. The adjusted operating margin contracted 1212 bps in the quarter to 16.3%.
Cash Position
Globus Medical exited the third quarter of 2023 with cash and cash equivalents and short-term marketable securities of $468.9 million compared with $612.8 million at the end of the second quarter.
Cumulative net cash provided by operating activities at the end of the third quarter was $138.3 million compared with the year-ago figure of $114.5 million.
2023 Guidance
The company updated its 2023 guidance.
The full-year net sales are projected to be $1.55 billion (up from previous guidance of $1.125 billion). The Zacks Consensus Estimate for the same is currently pegged at $1.13 billion.
The company’s adjusted EPS guidance for 2023 was reiterated at $2.30. The Zacks Consensus Estimate for the same is pegged at $2.29.
Our Take
Globus Medical exited the third quarter of 2023 on a bullish note with earnings and revenue beat. The third quarter of 2023 was a defining moment for Globus Medical, as it completed its planned merger with NuVasive to create the most innovative company in the spine industry. During the reported quarter, the legacy Globus business continues to drive share growth across its U.S. spine and trauma portfolios, while the Enabling Technologies business is benefiting from the continued uptake of EGPS and E3D systems. The company continues to witness strong international business growth, driven by further penetration of its focus countries, including Australia, Italy, Belgium, Poland, Austria and Ireland. The raised 2023 revenue outlook instills optimism.
However, escalating costs and expenses are exerting pressure on margins. The contraction of both margins is discouraging, too.
Zacks Rank and Key Picks
Globus Medical currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories ABT, Inari Medical NARI and Integer Holdings Corporation ITGR.
Abbott, carrying a Zacks Rank of 2 (Buy), reported adjusted EPS of $1.14 in third-quarter 2023, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.14 billion outpaced the consensus mark by 3.6%. 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 6.8%.
Inari Medical, carrying a Zacks Rank #2, reported adjusted EPS of 4 cents in third-quarter 2023, beating the Zacks Consensus Estimate by a staggering 128.6%. Revenues of $119 million outpaced the consensus estimate by 2.3%.
Inari Medical has an estimated earnings growth rate of 725% for the following year. Inari Medical’s earnings surpassed estimates in all the trailing four quarters, the average being 66.8%.
Integer Holdings reported a third-quarter 2023 adjusted EPS of $1.27, beating the Zacks Consensus Estimate by 20.9%. Revenues of $404.7 million surpassed the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.9%.
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