Globus Medical (GMED) Q4 Earnings Surpass, Margins Down
Globus Medical, Inc. GMED reported adjusted earnings per share (EPS) of 60 cents in the fourth quarter of 2023, beating the Zacks Consensus Estimate by 1.7%. The metric increased 1.7% 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 diluted EPS of 11 cents, up from the year-ago figure of 49 cents.
For the full year, adjusted earnings were $2.32 per share, 12.6% up from the year-ago period. The metric came in line with the Zacks Consensus Estimate.
Revenues
Worldwide sales in the quarter under review registered a remarkable increase of 124.6% year over year to $616.5 million. The reported figure exceeded the Zacks Consensus Estimate by 0.7%.
Globus Medical, Inc. Price, Consensus and EPS Surprise
Globus Medical, Inc. price-consensus-eps-surprise-chart | Globus Medical, Inc. Quote
Excluding the impacts of the NuVasive merger, legacy Globus revenues were $304.1 million, an increase of 10.8 % from last year’s comparable period.
Full-year revenues were $1.57 billion, reflecting a 53.3% increase from the year-ago period (same at constant currency basis or CER). The figure topped the Zacks Consensus Estimate by 0.6%.
Geographic Details
During the quarter under review, net sales generated in the United States increased 110.5% year over year (same at CER) to $490.8 million. Our model projected a 119.5% improvement in sales from this region.
Across international markets, revenues surged 204.6% (up 198.9%% at CER) to $125.7 million. This surpassed our model’s forecasted improvement of 117.3%.
Product Category
Musculoskeletal Solutions generated revenues of $583.8 million, up 138.3% year over year. Our model projected a year-over-year increase of 119.9% from this segment.
Legacy Globus musculoskeletal sales were $274 million, up 11.8% from the prior-year quarter. Growth was led by the company’s U.S. and international spine businesses as well as continued share growth within trauma.
Enabling Technologies generated revenues of $32.7 million in the fourth quarter of 2023, an improvement of 10.9% from the prior-year figure. However, the figure missed our model’s projected year-over-year increase of 98.6%.
Legacy Globus enabling technologies revenues were $30.1 million, an increase of 2.1% from the last year’s figure. The growth is attributed to a record number of units placed.
Margins
Gross profit in the reported quarter rose 72.2% year over year to $351 million. However, the gross margin contracted 1734 basis points (bps) to 56.9% on a 276.1% surge in the cost of sales to $265.5 million.
SG&A expenses in the reported quarter totaled $244.7 million, up 107.3% from the year-ago quarter’s levels. Research and development expenses increased 167.9% to $52.2 million.
The quarter’s adjusted operating profit fell 18.5% to $54.1 million from the year-ago quarter’s figure. The adjusted operating margin contracted 1539 bps in the quarter to 8.8%.
Cash Position
Globus Medical exited the fourth quarter of 2023 with combined cash and cash equivalents and short-term marketable securities of $517.8 million compared with $446.1 million at the end of 2022.
Cumulative net cash provided by operating activities at the end of the fourth quarter was $243.5 million compared with the year-ago figure of $178.5 million.
2024 Guidance
GMED initiated its outlook for 2024.
The full-year net sales are projected in the band of $2.450 billion-$2.475 billion. The Zacks Consensus Estimate is currently pegged at $2.50 billion.
The company’s adjusted EPS guidance for 2024 is in the range of $2.68-$2.70. The Zacks Consensus Estimate is pegged at $2.65.
Our Take
Globus Medical exited the fourth quarter of 2023 with better-than-expected earnings and revenues. The performance continues to be driven by the above market growth in the U.S. spine business, increasing momentum internationally and the strong performance of trauma.
The company made significant progress integrating the NuVasive merger. The combined product development team will focus on the rapid development of innovative solutions to address unmet clinical needs through the continuum of care, bringing procedural solutions to the marketplace. Globus Medical anticipates a strong year of product launches in 2024.
On the flip side, escalated expenses in the quarter resulted in a contraction in both the company’s gross and adjusted operating margins.
Zacks Rank and Key Picks
Globus Medical currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space are Stryker Corporation SYK, Cencora, Inc. COR and Cardinal Health CAH.
Stryker, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.
Cardinal Health reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.
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