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NuVasive (NUVA) Q1 Earnings Top Estimates, Gross Margin Up

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NuVasive, Inc. NUVA delivered first-quarter 2021 adjusted earnings per share (EPS) of 37 cents, down 22.9% from the year-ago figure. However, the figure beat the Zacks Consensus Estimate by 12.1%.

The one-time adjustments include expenses associated with certain ongoing litigation matters and amortization expenses, among others.

GAAP loss per share came in at 15 cents, deteriorating from the year-ago EPS of 10 cents.

Total Revenues

Revenues in the first quarter totaled $271.2 million, up 4.4% year over year on a reported basis (up 3.1% at constant exchange rate or CER). The top line surpassed the Zacks Consensus Estimate by 3.9%.

The increase was a result of month-over-month improvement in U.S. procedural volumes and low double-digit international growth on a reported basis as the impact of COVID-19 on elective surgeries continues to lessen.

Geographical & Segmental Details

In the reported quarter, U.S. Spinal Hardware business revenues rose 4.9% year over year to $145.2 million. The business was partly boosted by NuVasive’s thoracolumbar portfolio, which was primarily driven by continued adoption of advanced material science implants. Also, strong results from the clinical evaluation of Modulus ALIF and Reline 3D within the company’s pediatric portfolio contributed to the growth. However, this was offset by slower recovery in the XLIF franchise due to the pandemic.

NuVasive, Inc. Price, Consensus and EPS Surprise

NuVasive, Inc. Price, Consensus and EPS Surprise
NuVasive, Inc. Price, Consensus and EPS Surprise

NuVasive, Inc. price-consensus-eps-surprise-chart | NuVasive, Inc. Quote

Revenues from the U.S. Surgical Support business were $61.2 million in the first quarter, down 4.7% year over year. This sales decline was due to low levels of stocking orders within its biologics or interoperative neuromonitoring product lines due to the pandemic, creating additional pressure for procedural mix during the reported quarter.

In the quarter, the company registered international revenues of $64.8 million, reflecting a 13.4% year-over-year rise on a reported basis and 7.8% increase at CER. This resulted from strong contributions from the Asia Pacific region, which grew double-digits within the quarter on continued product adoption across all procedural segments.

Margin Details

In the reported quarter, gross profit improved 6.1% year over year to $199.4 million. Gross margin expanded 118 basis points (bps) to 73.5%.

Selling, general and administrative expenses increased 12.1% year over year to $145.9 million, whereas research and development (R&D) expenses climbed 21.7% year over year to $22.2 million.

Overall adjusted operating profit was $31.3 million, down 20.9% year over year. Adjusted operating margin was 11.5%, reflecting a 369-bp contraction year over year.

Operational Update

The company exited first-quarter 2021 with cash and cash equivalents, and short-term marketable securities of $233.9 million compared with $856.9 million at the end of 2020.

Cumulative net cash provided by operating activities at the end of first-quarter 2021 was $31.6 million compared with the prior-year period’s $5.2 million.

Our Take

NuVasive exited the first quarter of 2021 with better-than-expected earnings and revenues. The year-over-year growth in revenues looks impressive. The company continues to experience recovery in the U.S. business. The results were primarily driven by strong international growth, led by the Asia-Pacific region. Expansion of gross margin is again a plus. NuVasive’s increasing investment in R&D to strengthen foothold in less-invasive surgeries looks impressive.

However, the year-over-year decline in the bottom line is concerning. Rising operating costs and contraction in operating margins does not bode well either. The continued pandemic-led impacts on the company’s elective surgical volumes across the world are worrying as well.

Zacks Rank and Key Picks

NuVasive currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader medical space are Boston Scientific Corporation BSX, Illumina, Inc. ILMN and HCA Healthcare, Inc. HCA. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boston Scientific reported first-quarter 2021 adjusted EPS of 37 cents, beating the Zacks Consensus Estimate by 23.3%. Net revenues of $2.75 billion outpaced the consensus estimate by 5.3%. It currently carries Zacks Rank #2 (Buy).

Illumina reported first-quarter 2021 adjusted EPS of $1.89, beating the Zacks Consensus Estimate by 38.9%. Revenues of $1.09 billion outpaced the consensus estimate of $1.08 billion. It currently carries Zacks Rank #2.

HCA Healthcare reported first-quarter 2021 adjusted EPS of $4.14, surpassing the Zacks Consensus Estimate by 23.6%. Net revenues of $14 billion exceeded the Zacks Consensus Estimate by 2.2%. It currently carries Zacks Rank #2.

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