NuVasive, Inc. NUVA is gaining from strong sales performance across the U.S. spinal hardware and U.S. surgical support product lines. The robust international performance also increases investor confidence. However, mounting operating expenses and stiff competition raise apprehension.
Over the past year, the Zacks Rank #3 (Hold) stock has declined 19.2% compared with a 23.9% fall of the industry while the S&P 500 composite witnessed a 6.3% fall in the same period.
The renowned medical device company has a market capitalization of $2.69 billion. Its earnings for first-quarter 2022 surpassed the Zacks Consensus Estimate by 42.1%.
Let’s delve deeper.
Factors At Play
Huge Scope of Growth in Spine Market: The U.S. Spinal Hardware business registered 7.2% year-over-year growth in revenues in the first quarter of 2022. Within U.S. spinal hardware, the company’s thoracolumbar and cervical portfolios recorded strong performances. The cervical franchise continued to be a bright spot, with net sales growth of more than 20% in the first quarter. The growing uptake of product introductions within NuVasive’s interior portfolio and growth in thoracolumbar fixation continued to drive growth in the U.S. spinal hardware business.
Strong U.S. Surgical Support Prospect: Within the Surgical Support business, NuVasive continues to focus on unique spine offerings. The U.S. surgical support business rebounded well in the first quarter, delivering year-over-year net sales growth of 3.8%. The Pulse platform unit sales continued to perform per the company’s expectations, while the biologics benefited from the rise in procedural volumes.
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The company recently surpassed the 500 commercial case milestone for the Pulse platform and recorded the first international commercial cases in the U.K. This demonstrates that the Pulse value proposition is appealing to hospital executives and surgeon partners worldwide.
Growth Potential of International Business: According to NuVasive, the International region holds tremendous growth opportunities for the company. In the first quarter, the company registered year-over-year international sales growth of 10.5% on a reported basis and 18.6% on a constant-currency basis. The robust international performance was led by double-digit growth across Europe, Latin America and Japan.
Escalating Expenses: In the first quarter of 2022, NuVasive’s selling, general and administrative expenses rose 9.8% year over year, whereas research and development expenses climbed 5.1% year over year. The escalating operating expenses led to a 189-basis-point contraction in adjusted operating margin, exerting pressure on the bottom line.
Tough Competitive Landscape: The presence of a large number of players has made the medical devices market intensely competitive. The orthopedic industry, in particular, is highly competitive with the presence of bellwethers like Zimmer Holdings, Stryker, Johnson & Johnson’s DePuy, Orthofix International N.V, Vyaire Medical (formerly VIASYS Healthcare, a division of Becton, Dickinson and Company) and Medtronic.
Over the past 90 days, the Zacks Consensus Estimate for NuVasive’s 2022 earnings has moved north by 6.5% to $2.31.
The Zacks Consensus Estimate for 2022 revenues is pegged at $1.22 billion, suggesting a 7.4% rise from the year-ago reported number.
A few better-ranked stocks in the broader medical space are UnitedHealth Group Incorporated UNH, Medpace Holdings, Inc. MEDP and Alkermes plc ALKS.
UnitedHealth, having a Zacks Rank #2 (Buy), reported first-quarter 2022 earnings per share (EPS) of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 14.2%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.
Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.
Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.
Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently has a Zacks Rank #2.
Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.
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