NuVasive, Inc. NUVA has been showing solid progress on robust performance within U.S. Spinal Hardware and U.S. Surgical Support businesses as well as rapid expansion into international markets.
The company has a market cap of $3.19 billion. It has an expected earnings growth rate of 11.9% for the next five years.
Over the past year, this company’s share price has outperformed its industry. The stock has gained 22.8% compared with the industry’s 4.1% increase and the S&P 500 index’s 4.4% rise.
Riding on solid prospects, this Zacks Rank #3 (Hold) stock is worth retaining for now.
What’s Favoring the Stock?
International Business Flourishes: According to NuVasive, international regions hold tremendous growth opportunity. In the first quarter of 2019, the EMEA region witnessed a solid uptick on strong contribution from the United Kingdom, Southern Europe and Benelux. The tender secured last year in Germany and Benelux contributed to international revenues in the first quarter. Revenues earned from the Asia-Pacific region grew on solid contributions from Japan, Australia and New Zealand.
Solid Growth in U.S. Spinal Hardware Business: NuVasive’s U.S. Spinal Hardware business has been performing well of late. The first-quarter revenue growth was driven by strong adoption of new products coupled with new surgeon conversions. The company registered a healthy uptick in its XLIF and ALIF franchises on momentum gained in a lateral single-position surgery solution, now branded as the X360 System. In particular, the Advanced Materials Science portfolio with the COHERE, cervical, and TLIF Porous PEEK antibodies saw massive growth from the year-ago period.
Robust Performance by U.S. Surgical Support Business: Within the Surgical Support business, NuVasive completed the acquisition of Safe Passage at the end of the first quarter. With this acquisition, the company has solidified its leadership position as the largest provider of outsourced intraoperative neurophysiological monitoring services. Per management, the market is gradually experiencing greater adoption and increasing demand for its offering of surgical alternatives with less tissue disruption.
However, there are a few factors which have been deterring growth of the stock lately.
Macro-economic Headwind May Hamper Growth: The market for spine is highly susceptible to any change in economic, political and regulatory influences which may slow down the spine market’s growth rate. These changes include pricing pressure from the continued consolidation of hospital customers and the expansion of group purchasing organizations, unfavorable third-party payer coverage, reimbursement policies, and new and proposed legislation and regulations designed to contain or reduce the cost of healthcare.
Pricing Pressure Persists: Pricing continues to be a major headwind for NuVasive as it experiences declining prices for its products due to increasing competition in the spine market.
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.
Which Way Are Estimates Heading?
For the second quarter of 2019, the Zacks Consensus Estimate for earnings is pegged at 56 cents, indicating a 3.5% fall from the year-ago figure. The same for revenues stands at $291.8 million, implying a year-over-year improvement of 3.6% from the prior-year reported number.
For 2019, the Zacks Consensus Estimate for earnings is pinned at $2.28, suggesting 2.2% year-over-year growth from the year-earlier figure. The same for revenues is pegged at $1.15 billion, hinting at 4.8% rise from the reported figure in the prior-year quarter.
Some better-ranked stocks in the broader medical space are Cerner Corporation CERN, Penumbra PEN and Bruker Corporation BRKR. While Cerner sports a Zacks Rank #1 (Strong Buy), the other two stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cerner’s long-term earnings growth rate is expected to be 13.5%.
Penumbra’s long-term earnings growth rate is projected at 21.5%.
Bruker’s long-term earnings growth rate is estimated at 11.7%.
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