NuVasive Grows On Strong Product Adoption Amid Pricing Woe

On Jun 17, we issued an updated research report on NuVasive, Inc. (NASDAQ:NUVA) . The company continues to witness strength in the global business. However, persistent decline in product prices due to intense competition in the spine market is a concern. NuVasive currently carries a Zacks Rank #3 (Hold).

In the past three months, shares of NuVasive have underperformed the industry it belongs to. The stock has rallied 20.4% compared with the industry's 13.3% rise.

Launch of several products in the Spinal Hardware business, balanced revenue growth across all key operating segments and robust sales figures in the international markets contributed to the surge in the company’s share price. Within the U.S. Spinal Hardware business, a consistent adoption of NuVasive’s expandable cages, such as TLX 20 Degree expandable cage, its proprietary Porous PEEK implants and the X360 System, has been a major boost. Within the Surgical Business, closing of the Safe Passage acquisition was crucial.

Per NuVasive, the International region holds tremendous growth opportunity for the company. In the first quarter, the company delivered strong international revenues, reflecting 16% year-over-year growth at CER. The EMEA region witnessed a solid uptick, driven by a strong contribution from the United Kingdom, Southern (NYSE:SO) Europe and Benelux. The tender, secured last year in Germany and Benelux, generated international revenues in the reported period. Revenues earned from the Asia-Pacific region grew on the back of a sturdy recognition from Japan, Australia and New Zealand.

Meanwhile, unfavorable pricing persists to be a major headwind as NuVasive experiences declining prices for products due to stiffening competition in the spine market; adverse pricing pressure experienced by hospital customers from managed care organizations, insurance providers as well as other third-party payers; and higher market power of hospital customers as the medical device industry consolidates. Further, escalating costs and expenses are other major concerns.

Key Picks

Some better-ranked stocks in the broader medical space are Cerner Corporation (NASDAQ:CERN) , Penumbra (NYSE:PEN) and Bruker Corporation (NASDAQ:BRKR) . While Cerner sports a Zacks Rank #1 (Strong Buy), Penumbra and Bruker carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cerner’s long-term earnings growth rate is expected to be 13.5%.

Penumbra’s long-term earnings growth rate is projected at 21.5%.

Bruker’s long-term earnings growth rate is estimated at 11.7%.

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