Nevro Corp. NVRO is well-poised for growth in the coming quarters, courtesy of its solid foothold in the Spinal Cord Stimulation (SCS) market. The optimism led by a solid third-quarter 2022 performance and continued strength in its flagship Senza platform are expected to contribute further. However, stiff competition and dependence on third-party payors persist.
Over the past year, this Zacks Rank #3 (Hold) stock has lost 49.5% compared with the 23.8% decline of the industry and 13.9% fall of the S&P 500.
The renowned global medical device company has a market capitalization of $1.57 billion. The company projects 103.2% growth for 2022 and expects to maintain its strong performance. Nevro’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and broke even in the other, the average earnings surprise being 9.2%.
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Let’s delve deeper.
Solid Foothold in SCS Market: Nevro’s foothold in the global SCS therapy business raises our optimism about the stock. In October, the company announced that the FDA had approved its manufacturing operations in Costa Rica for the production of its proprietary SCS systems for treating chronic pain, including its HFX product platform.
During the third-quarter earnings release, Nevro announced multiple positive payer coverage updates for the treatment of PDN from Aetna and several additional Blue Cross Blue Shield health plans.
Strength in Senza: We are optimistic about Nevro’s continued strength in its flagship Senza platform. Based on analysis from the company’s SENZA- Randomized Controlled Trial (RCT) and European studies, as well as the SENZA-PDN and SENZA-NSRBP (non-surgical refractory back pain) RCTs, Nevro believes the 10 kHz therapy can be an attractive treatment option for patients. Due to the removal of paresthesia, the company believes that the 10 kHz therapy can also be effective for patients with chronic upper limb and neck pain. In October, Nevro received the FDA’s approval for the Senza HFX iQ SCS system.
Strong Q3 Results: Nevro’s better-than-expected third-quarter 2022 results buoy optimism. The company recorded an improvement in overall top line and robust domestic revenues. An uptick in total U.S. permanent implant procedures and U.S. trial procedures were also seen. The sequential improvement in U.S. PDN trial procedures was encouraging.
Dependence on Third-Party Payors: Nevro’s success in marketing its products largely depends on whether U.S. and international government health administrative authorities, private health insurers and other organizations adequately cover and reimburse customers for the cost of its products. Access to adequate coverage and reimbursement for SCS procedures using Senza by third-party payors is essential for the acceptance of Nevro’s products by its customers.
Stiff Competition: Nevro operates in a highly competitive medical device industry, which is subject to technological change. The company’s success depends partly upon its ability to establish a competitive position in the neuromodulation market by securing broad market acceptance of its HF10 therapy and Senza products for the treatment of approved chronic pain conditions.
Nevro has been witnessing an upward estimate revision trend for 2022. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved from a loss of $2.24 per share to earnings of 12 cents.
The Zacks Consensus Estimate for the company’s fourth-quarter 2022 revenues is pegged at $112.7 million, suggesting a 9.7% improvement from the year-ago quarter’s reported number.
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, ShockWave Medical, Inc. SWAV and McKesson Corporation MCK.
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has gained 9.5% against the industry’s 28.8% decline in the past year.
ShockWave Medical, carrying a Zacks Rank #2 at present, has an estimated growth rate of 21.2% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 146.1%.
ShockWave Medical has gained 47% against the industry’s 23.8% decline over the past year.
McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.1%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 4.8%.
McKesson has gained 77.2% against the industry’s 6.6% decline over the past year.
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