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NuVasive (NUVA) Suffers From Macro Headwinds, Price Issue

NuVasive NUVA business suffers frompricing and payers pressure, reimbursement issues and a competitive landscape. The stock bears a Zacks Rank #5 (Strong Sell).

During the thirdquarter of 2022, NuVasive’s revenue missed the consensus mark by 0.8%. The company’s performance continues to be challenged by inflationary costs, supply chain disruptions, volatility in foreign exchange rates and the persistent COVID-led impact.

In the reported quarter, Selling, general and administrative expenses climbed 5.4% year over year to $154 million, whereas research and development (R&D) expenses rose 1.1% year over year to $23.7 million. The increase in operating expenses was primarily driven by variable expenses on higher net sales, freight costs and continued R&D investments to advance core spine and enabling technologies product portfolios.

The company believes its 2022 guidance is appropriately conservative, considering macroeconomic pressures on net sales and operating profit experienced till the third-quarter earnings release. NUVA expects to experience similar levels of impact throughout the year.

NuVasive, Inc. Price


NuVasive, Inc. Price
NuVasive, Inc. Price

NuVasive, Inc. price | NuVasive, Inc. Quote


Further, stiff competition and pricing pressure continue to pose challenges as well. The orthopedic industry, in particular, is highly competitive with the presence of bellwethers like Zimmer Holdings, Stryker, Johnson & Johnson’s DePuy. In terms of pricing, the company experiences declining prices for its products due to increasing competition in the spine market.

On a positive note, NuVasive exited the third quarter of 2022 with earnings beating the Zacks Consensus Estimate. Strong sales performance across the U.S. Spinal Hardware and U.S. Surgical Support businesses instill optimism. Robust international performance is encouraging. The continued demand for the Simplified Cervical Disc and the Pulse platforms is also encouraging. The expansion of both margins is an upside.

NuVasive is undertaking efforts to advance its position in the $2.6-billion cervical sub-segment. The company’s C360 portfolio currently features the NuVasive ACP system with Advanced Material Science interbodies and the Simplified Cervical Disc.

During the third quarter earnings call, the company mentioned the recent commercial launch of Reline Cervical. Reline Cervical was designed to be integrated with Pulse allowing surgeons to support more complex deformity cases with the help of global alignment planning, neuro monitoring, radiation reduction in imaging enhancement, navigation and patient-specific Rod bending.

In the past three months, NuVasive has outperformed its industry. The stock has lost 23.1% compared with the industry's 33% fall.

Key Picks

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Boston Scientific Corporation BSX and Merit Medical Systems, Inc. MMSI.

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 lost 10.6% compared with the industry’s 30.3% decline in the past year.

Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.3%. BSX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average beat being 1.9%.

Boston Scientific has gained 6.8% against the industry’s 42.6% decline over the past year.

Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.

Merit Medical has gained 13.7% against the industry’s 8.7% decline in the past year.

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