Orthofix (OFIX) Q3 Earnings Top Estimates, 2023 Sales View Cut
Shares of Orthofix Medical OFIX have plunged 4.5% since the release of its third-quarter earnings on Nov 8.
The company delivered third-quarter 2023 adjusted earnings per share (EPS) of 7 cents, down 76.7% from a year ago. However, the figure beat the Zacks Consensus Estimate of a loss of 75 cents.
The one-time adjustments include expenses associated with long-term income tax rate adjustment, strategic investments and the amortization of acquired intangibles, and medical device regulation charges, among others.
For the third quarter, GAAP loss per share was 77 cents compared with a loss of 53 cents in the year-ago period.
Total Revenues
Quarterly revenues totaled $184 million, up 61.4% year over year on a reported basis and 8% at Constant Exchange Rate (CER). Yet, the metric missed the Zacks Consensus Estimate by a marginal 0.8%.
Segmental Details
Across product categories, Bone Growth Therapies’ revenues reached $53.4 million, up 14.7% year over year and at CER. The rise was driven by growth in both spine and fracture portfolios.
Revenues from Spinal Implants, Biologics and Enabling Technologies were $101 million, up 154.7% year over year (154.5% at CER).
The Global Spine business' revenues increased 79.1% year over year to $154.4 million.
The Global Orthopedics business' revenues climbed 6.6% year over year (up 0.7% at CER) to $29.7 million.
Margins
In the reported quarter, gross profit rose 43.6% year over year to $119.8 million. The gross margin contracted 809 basis points to 65.1%.
Sales and marketing, general and administrative, and research and development expenses escalated 71.2%, 40.4% and 55.4% year over year to $94.9 million, $27.1 million and $18.6 million, respectively.
ORTHOFIX MEDICAL INC. Price, Consensus and EPS Surprise
ORTHOFIX MEDICAL INC. price-consensus-eps-surprise-chart | ORTHOFIX MEDICAL INC. Quote
Adjusted operating loss for the quarter was $20.9 million compared with $3.3 million in the prior-year period.
Operational Update
The company exited third-quarter 2023 with cash and cash equivalents of $33.6 million compared with $38 million at the end of second-quarter 2023.
Cumulative net cash used in operating activities at the end of third quarter was $39.1 million against the prior-year period’s cash flow of $13.9 million.
Cumulative capital expenditure incurred by OFIX at third-quarter end was $46.9 million compared with $17.3 million at second-quarter end.
Accordingly, cumulative free cash flow at the end of third quarter was ($86.1) million. It reported free cash outflow of $31.1 million at the prior-year end.
2023 Outlook
Orthofix updated its guidance for 2023. The guidance is based on current foreign-currency exchange rates and do not take into account any additional potential exchange rate changes that may occur this year.
For 2023, management expects net sales in the $739-$744 million band (previous guided range was $752-$758 million).The Zacks Consensus Estimate is pegged at $742.2 million.
Our Take
Orthofix exited the third quarter of 2023 with better-than-expected earnings, while revenues lagged estimates. It registered year-over-year revenue growth on the back of strength in global spine business.
During the quarter, it witnessed very strong growth across multiple business segments and product lines. Orthofix’s complementary portfolio is driving even further incremental cross-selling opportunities.
However, a contraction in both margins does not bode well. The increase in sales and marketing expense is primarily driven by integration-related severance, retention costs, stock-based compensation associated with the merger and higher commissions as a result of the achievement of certain sales objectives. The company lowered its 2023 sales outlook, raising apprehension.
Zacks Rank
Orthofix currently has a Zacks Rank #2 (Buy).
Other Key Picks
Some other top-ranked stocks in the broader medical space are Haemonetics HAE,Insulet PODD and DexCom DXCM. While Haemonetics and DexCom currently carry a Zacks Rank #2 each, Insulet sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ stock has risen 11.6% in the past year. Estimates for Haemonetics’ 2023 and 2024 EPS have increased from $3.82 to $3.86 and $4.07 to $4.11, respectively, in the past 30 days.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 16.1%. In the last reported quarter, it posted earnings surprise of 5.3%.
Estimates for Insulet’s 2023 EPS have jumped from $1.61 to $1.90 in the past 30 days. The stock has fallen 40.9% in the past year compared with the industry’s decline of 7%.
PODD’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 105.1%. In the last reported quarter, it delivered earnings surprise of 77.4%.
Estimates for DexCom’s 2023 EPS have ascended from $1.23 to $1.41 in the past 30 days. Shares of DXCM have dipped 7.8% in the past year compared with the industry’s decline of 7.1%.
DXCM’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 36.4%. In the last reported quarter, it reported earnings surprise of 47.1%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
ORTHOFIX MEDICAL INC. (OFIX) : Free Stock Analysis Report
Haemonetics Corporation (HAE) : Free Stock Analysis Report
DexCom, Inc. (DXCM) : Free Stock Analysis Report
Insulet Corporation (PODD) : Free Stock Analysis Report
