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Wright Medical (WMGI) Q1 Earnings & Revenues Top Estimates

Zacks Equity Research

Wright Medical Group N.V. WMGI delivered first-quarter 2019 adjusted earnings of 5 cents per share, which surpassed the Zacks Consensus Estimate by 66.7%. The company reported adjusted loss of 1 cent per share in the year-ago quarter.

First-quarter revenues totaled $230.1 million, which outpaced the Zacks Consensus Estimate by 1.6%. The top line also improved 15.9% year over year.

Wright Medical Group N.V. Price, Consensus and EPS Surprise

 

Wright Medical Group N.V. Price, Consensus and EPS Surprise | Wright Medical Group N.V. Quote

Segment Details

Lower Extremities

This segment reported worldwide revenues of $86.9 million, up 20.4% year over year.

Revenues in the United States increased 25.5% to $71.3 million on a year-over-year basis. International revenues totaled $15.6 million, up 1.5% year over year.

Upper Extremities

Revenues at this segment totaled $111.2 million, up 14.3% from the prior-year quarter’s level.

In the United States, revenues increased 20.8% on a year-over-year basis to $81.7 million. Internationally, the segment reported revenues worth $29.5 million, down 0.4% year over year.

Biologics

Biologics revenues amounted to $27.2 million in the quarter under review, up 16% on a year-over-year basis.

While international revenues at the segment declined 13.7% to $4.5 million, U.S. revenues summed $22.6 million, up 24.6% year over year.

Sports Med & Other

At this segment, net revenues came in at $4.9 million, down 14.3% on a year-over-year basis.

The segment’s U.S. revenues decreased 2.6% to $2.1 million, while international revenues decreased 21.3% to $2.8 million.

Margin Analysis

In the quarter under review, gross profit totaled almost $183.8 million, up 16.8% year over year. Gross margin was 79.9% of net revenues, which expanded 60 bps from the year-ago quarter.

Selling, general and administrative expenses were $153.3 million, up 11.7% year over year.

Research and development expenses amounted to $16.9 million, up 22.1% year over year.

Operating income in the first quarter of 2019 was $5.9 million against operating loss of $0.9 million in the prior-year quarter.

Guidance Reiterated

For 2019, Wright Medical issued revenue guidance in the band of $954-$966 million. The mid-point of $960 million is below the Zacks Consensus Estimate of $961.2 million. This reflects 15-17% net revenue growth on a constant-currency basis, 11-13% increase on a pro-forma constant-currency basis and 10-12% improvement on an organic constant-currency basis.

The company expects 2019 adjusted earnings per share of 17-25 cents. Notably, the mid-point of 21 cents is in line with the Zacks Consensus Estimate.

Conclusion

Wright Medical exited the first quarter on a promising note. The company's adjusted earnings and revenues outpaced Zacks Consensus Estimate. It expects to deliver double-digit, constant-currency net sales growth each year and maintain adjusted gross margin in the high 70% range every year.

Solid performance at the Upper and the Lower Extremities segments buoys optimism. Further, consistent growth in PERFORM Reversed glenoid and robust contributions from the SIMPLICITI shoulder system continue to impress.  Wright Medical is likely to gain from the upcoming launch of REVIVE revision shoulder system as well. Furthermore, management is confident about the recent acquisition of BLUEPRINT and also remains highly optimistic about the Cartiva buyout.

Meanwhile, the company’s increasing operating expenses are worrisome. Additionally, the sports business performed disappointingly in the first quarter. Distribution issues in Europe and Asia as well as foreign currency volatility add to woes. Increased costs related to product launch and re-building infrastructure is expected to keep the margins under pressure.

Zacks Rank

Currently, Wright Medical carries a Zacks Rank #3 (Hold).

Earnings of MedTech Majors at a Glance

Some better-ranked stocks which reported solid results this earning season are Stryker Corporation SYK, DENTSPLY SIRONA Inc. XRAY and CONMED Corporation CNMD, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered first-quarter 2019 adjusted earnings per share of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion were in line with the Zacks Consensus Estimate.

DENTSPLY reported adjusted earnings per share (EPS) of 49 cents in the first quarter of 2019, beating the Zacks Consensus Estimate of 38 cents. Revenues came in at $946.2 million and surpassed the Zacks Consensus Estimate of $917.1 million.

CONMED delivered first-quarter 2019 adjusted earnings per share of 57 cents, which beat the Zacks Consensus Estimate of 54 cents. Revenues were $218.4 million, surpassing the Zacks Consensus Estimate of $213 million.

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