NuVasive, Inc. NUVA has been gaining from balanced segmental growth globally. Product launches and its focus toward priority areas also bode well. The company’s segmental prospects as well as 2020 guidance are expected to aid its performance. However, continued pricing pressure and a stiff competitive landscape have been affecting the company.
Over the past year, shares of the Zacks Rank #3 (Hold) company have lost 28.7% compared with the industry’s 26% decline.
The renowned medical device provider, which specializes in developing minimally-disruptive surgical products and procedurally-integrated solutions for spine, has a market capitalization of $2.05 billion. The company projects 13.8% growth for the next five years and expects to maintain its strong segmental performance. Further, it delivered a positive earnings surprise of 16.7%, on average, over the trailing four quarters.
Let’s delve deeper.
Impressive Q4 Results: We are upbeat about the company’s better-than-expected results in the fourth quarter of 2019. We are also optimistic about its robust segmental growth, especially across its U.S. Spinal Hardware business, on increased adoption of lateral single-position surgery and X360 system by surgeons. Robust sales figures in some of the key international markets buoy optimism.
Expansion in both margins in the quarter bodes well. A revised sales growth guidance for 2020 also buoy optimism.
Product Pipeline: We are optimistic about the company’s impressive product pipeline, which includes products like cohere XLIF and 3D printed titanium alpha. NuVasive is currently on track to build upon its Advanced Material Science portfolio of spinal interbodies to support various procedural categories. This includes the full commercialization of cohere XLIF and several key porous PEEK as well as optimizing 3D printed titanium alpha launches related to ALIF, TLIF and more.
The company is on track to launch an anterior cervical plate to treat degeneration, trauma and deformity as well as a new cervical fixation system to improve posterior surgery.
Stable Liquidity Position: We are upbeat about the strong liquidity position of NuVasive. The company exited 2019 with cash and cash equivalents of $213 million compared with the $117.8 million at the end of 2018. Full-year net cash provided by operating activities totaled $235.3 million compared with the prior year’s $219.2 million.
Continued Pricing Pressure: Pricing continues to remain a major headwind for NuVasive as it experiences a decline in prices for its products due to increasing competition in the spine market. This includes pricing pressure experienced by hospital customers from managed care organizations, insurance providers and other third-party payers, and increased market power of hospital customers as the medical device industry consolidates.
Stiff Competitive Landscape: NuVasive faces stiff competition from a large number of players in the medical devices market. The orthopedic industry, in particular, is highly competitive, with biggies like Zimmer Holdings.
The Zacks Consensus Estimate for NuVasive’s first-quarter 2020 revenues is pegged at $287.2 million, suggesting a 4.5% rise from the year-ago reported number.
Some better-ranked stocks from the broader medical space are ResMed Inc. RMD, Medtronic plc MDT and Hill-Rom Holdings, Inc. HRC.
ResMed has a projected long-term earnings growth rate of 14.4%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Medtronic’s long-term earnings growth rate is estimated at 7.1%. The company presently carries a Zacks Rank #2.
Hill-Rom’s long-term earnings growth rate is estimated at 11.1%. It currently carries a Zacks Rank #2.
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