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Globus Medical (GMED) Q3 Earnings Meet Mark, Revenue View Up

Zacks Equity Research

Globus Medical, Inc. GMED reported third-quarter 2019 adjusted earnings per share (EPS) of 43 cents, in line with the Zacks Consensus Estimate. However, the metric improved 10.3% 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 38 cents per share, reflecting an 8.6% rise from the year-ago quarter.

Revenue Details

Third-quarter 2019 worldwide sales summed $196.2 million, up 15.9% (up 16% at constant exchange rate or CER) year over year. The figure also trumped the Zacks Consensus Estimate by 5.2%.

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

Sales generated in the United States including robotic improved 16.9% year over year on continued pull through from robotic placements in the reported period.

Meanwhile, international sales rose 11.2% from the year-earlier quarter (up 11.3% at CER).

Moreover, Musculoskeletal Solutions products generated revenues of $182.3 million, up 11.8% year over year. However, Enabling Technologies products revenues of $13.9 million in the quarter represented a 125.2% surge from the prior-year figure of $6.2 million.

Margin

Gross profit in the reported quarter rose 14.8% year over year to $150.8 million. However, gross margin contracted 77 basis points (bps) to 76.9% on a 19.9% rise in cost of goods sold to $45.4 million.

Selling, general and administrative expenses in the reported quarter were $88.5 million, up 17.7% from the year-ago quarter. Research and development expenses, however, contracted 6.6% to $14.5 million.

Operating profit grew 17.5% year over year to $47.9 million while operating margin expanded 33 bps to 24.4% in the quarter under review.

Cash Position

Globus Medical exited the third quarter with cash and cash equivalents and short-term marketable securities of $277.6 million compared with $240.4 million at the end of the second quarter. Year to date, net cash provided by the operating activities was $117.7 million compared with $137.4 million a year ago.

2019 Guidance

The company reaffirmed its 2019 adjusted EPS guidance at $1.72. The Zacks Consensus Estimate for the metric is pegged at $1.71, which lies below the company’s issued guidance.

The company, however, raised 2019 sales guidance to $783 million from $775 million. The Zacks Consensus Estimate for the same is pegged at $776.4 million, above the company’s projection.

Our Take

Globus Medical posted mixed third -quarter results with earnings meeting the Zacks Consensus Estimate and revenues beating the mark. Both Musculoskeletal Solutions and Enabling Technologies registered strong sequential growth. Also, the global spine business demonstrated solid year-over-year improvement. The company is also optimistic about maintaining the upside in implant sales with ExcelsiusGPS technology.

Meanwhile, the operating margin expansion buoys optimism. A raised sales outlook for 2019 boosts investors’ confidence.

However, the contraction in gross margin is concerning.

Zacks Rank & Key Picks

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

A few better-ranked medical device companies, which posted solid results this earnings season, are ResMed Inc RMD, NuVasive, Inc NUVA and Thermo Fisher Scientific Inc TMO.

ResMed, with a Zacks Rank #2 (Buy), reported first-quarter fiscal 2020 adjusted EPS of 93 cents, surpassing the Zacks Consensus Estimate by 6.9%. Its revenues of $681.1 million outpaced the consensus mark by 3.7%.

NuVasive’s third-quarter 2019 adjusted EPS of 59 cents surpassed the Zacks Consensus Estimate by 9.3%. Its revenues totaled $290.8 million, which surpassed the consensus estimate by 2.4%. The stock currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher, with a Zacks Rank #2, delivered third-quarter 2019 adjusted EPS of $2.94, beating the Zacks Consensus Estimate by 2.1%. Its revenues of $6.27 billion beat the Zacks Consensus Estimate by 1.3%.

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