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NuVasive's (NUVA) Q2 Earnings Beat Estimates, Revenues Miss

Zacks Equity Research
·5 mins read

NuVasive, Inc. NUVA delivered second-quarter 2020 adjusted loss per share of 40 cents, slipping from the year-ago earnings per share (EPS) of 63 cents. However, the figure was narrower than the Zacks Consensus Estimate of a loss of 49 cents per share.

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

GAAP loss per share came in at 98 cents, down from the year-ago EPS of 29 cents.

The year-over-year decline can be attributed to significantly lower revenues on a year-over-year basis due to the coronavirus outbreak.

Total Revenues

Revenues in the second quarter totaled $203.6 million, down 30.3% year over year on a reported basis (down 30.2% at constant exchange rate or CER). The top line lagged the Zacks Consensus Estimate by 0.3%.

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

Notably, total revenues were within the company’s projection indicated in the preliminary results announced in July. The company noted that net sales exceeded the company’s expectations due to an uptick in monthly volumes in June.

Geographical & Segmental Details

In the reported quarter, U.S. Spinal Hardware business revenues declined 29% year over year to $113.8 million. The company noted that despite disappointing performance by the segment, its X360 system has been a key growth driver.

Revenues from the U.S. Surgical Support business were $47.2 million in the second quarter, down 36.2% year over year. The business experienced a slowdown in volumes due to the pandemic and NuVasive clinical services payer mix dynamics.

In the quarter, the company registered international revenues of $42.6 million, reflecting a 26.4% year-over-year fall on a reported basis and 25.7% fall at CER. This resulted from non-uniform impact of and recovery from the pandemic across geographies based on local response to the pandemic.

Margin Details

In the reported quarter, gross profit declined 42.6% year over year to $123.1 million. Gross margin contracted 1298 basis points (bps) to 60.5%.

Selling, general and administrative expenses declined 17.3% year over year to $126.4 million, whereas research and development expenses climbed 10.6% year over year to $19.4 million.

Adjusted operating loss was $22.7 million against the year-ago operating income of $44.1 million.

Operational Update

The company exited the second quarter with cash and cash equivalents, and short-term marketable securities of $926.8 million compared with $511.9 million at the end of the first quarter.

Cumulative net cash provided by operating activities at the end of the second quarter was $33.1 million compared with the prior-year period’s $93.4 million.

Guidance

NuVasive noted that it is currently not reinstituting its financial guidance for the year as the scope for spine surgery volumes for the remainder of the year continues to be limited. The company is also currently unable to predict the pace and time of recovery of the elective surgery volumes.

Our Take

NuVasive exited the second quarter of 2020 on a mixed note with narrower-than-expected loss per share but lower-than-expected revenues. NuVasive witnessed a significant fall in elective procedure volumes in the second quarter due to the pandemic. The company noted that the fall in procedure volumes in April, which was the hardest hit period in the quarter, was in line with its expectation. The company performed disappointingly across geographies and segments. The contraction in gross margin and operating loss is concerning as well. The company is unable to provide any annual guidance, which raises apprehensions.

On a positive note, the potential of the X360 system buoys optimism. Given that technological innovation is the key growth driver, NuVasive intends to maintain its levels of R&D investment, instilling investor confidence in the stock. The company is expanding its complex spine portfolio with the global commercial availability of Reline 3D, a posterior fixation system for patients suffering from pediatric spinal deformities, which is encouraging. The global recognition of NuVasive’s LessRay radiation reduction and workflow enhancement platform is an added benefit.

Other notable achievements by the company is the commercial launch of the Modulus XLIF Dual Sided Plate and the FDA clearances for Modulus ALIF and Cohere TLIF-O.

Zacks Rank and Key Picks

NuVasive currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and Hologic, Inc. HOLX.

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher, a Zacks Rank #2 company, reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

Hologic reported third-quarter fiscal 2020 adjusted EPS of 75 cents, surpassing the Zacks Consensus Estimate by a stupendous 108.3%. Net revenues of $822.9 million exceeded the Zacks Consensus Estimate by 37.1%. It currently sports a Zacks Rank #1.

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