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Globus Medical (GMED) Q3 Earnings Beat, U.S. Business Strong

Zacks Equity Research
·4 min read

Globus Medical, Inc. GMED reported third-quarter 2020 adjusted earnings per share (EPS) of 49 cents, beating the Zacks Consensus Estimate by 58.1%. The metric also improved 14.9% 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 earnings per share of 44 cents per share, reflecting a 15.8% rise from the year-ago quarter’s EPS.

Revenues

Third-quarter 2020 worldwide sales totaled $216.1 million, up 10.1% year over year (up 10% at constant exchange rate or CER). The reported figure surpassed the Zacks Consensus Estimate by 9.3%.

Quarterly Details

Sales generated in the United States during the quarter under review improved 11.9% year over year to $182.1 million driven by strong recovery of U.S. spine, partially offset by lower INR (imaging, navigation and robotic) sales due to the lingering impacts of COVID-19.

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

International sales of $34 million improved 1.4% from the year-earlier quarter (up 0.4% at CER). According to the company, performance of its spinal implant business varied by region, showing strong growth in Spain, Australia, Germany and Italy and demonstrating adverse pandemic impacts in Japan, the U.K. and India.

Musculoskeletal Solutions products generated revenues of $207.1 million, up 13.6% year over year. Enabling Technologies product revenues of $9 million in the quarter reflected a 34.9% plunge from the prior-year figure.

Margin

Gross profit in the reported quarter dropped 5.4% year over year to $159 million. Gross margin contracted a huge 329 basis points (bps) to 73.6% on a 25.8% rise in cost of goods sold to $57.1 million.

Selling, general and administrative expenses in the reported quarter were $89.2 million, up 0.8% from the year-ago quarter. Research and development expenses, however, declined 0.6% to $14.4 million.

Operating margin in the reported quarter was 25.6%, a 126 basis-point expansion from the year-ago period.

Cash Position

Globus Medical exited the third quarter with cash and cash equivalents, and short-term marketable securities of $409.6 million compared with $316.7 million at the end of the second quarter.

Notably, the company remains debt free.

Cumulative net cash provided by operating activities at the end of the third quarter was $118.6 million compared with the year-ago $117.7 million.

2020 Guidance

Globus Medical is currently unable to predict the extent or duration of the pandemic’s impact on its financial and operating results. Accordingly, the company has not provided any financial guidance this time as well.

Our Take

Globus Medical exited the third quarter of 2020 with better-than-expected results despite pandemic-led business disruptions. The 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.

International performance was comparatively sluggish based on mixed performances across all nations. Contraction of gross margin was discouraging too. The company’s decision to not provide any financial guidance raises apprehensions.

Zacks Rank and Stocks to Consider

Globus Medical currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader medical space that have already announced their quarterly results are Thermo Fisher Scientific  TMO, Align Technology ALGN and AngioDynamics ANGO, each sporting a Zacks Rank of 1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher reported third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion surpassed the consensus mark by 10%.

Align Technology reported third-quarter 2020 adjusted EPS of $2.25, which surpassed the Zacks Consensus Estimate by 281.4%. Revenues of $734.1 million outpaced the consensus mark by 38%.

AngioDynamics reported first-quarter fiscal 2021 adjusted EPS of 2 cents against the Zacks Consensus Estimate of a loss per share of 6 cents. Revenues of $70.2 million beat the consensus mark by 6.9%.

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