NuVasive (NUVA) Q4 Earnings Beat Estimates, Margins Fall

NuVasive, Inc. (NASDAQ:NUVA) reported fourth-quarter 2018 adjusted earnings per share (EPS) of 69 cents, reflecting a 23.2% rise from the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate by 9.5%. On a reported basis, fourth-quarter 2018 EPS came in at 23 cents, a plunge of 48.9% from the year-ago period.

For the full year of 2018, adjusted EPS came in at $2.23, an increase of 17.9% from the year-ago period.

Revenues in the fourth quarter came in at $288.3 million, up 6.3% on a reported basis (up 6.9% at constant exchange rate or CER) year over year. The top line also beat the Zacks Consensus Estimate, by a margin of 0.01%. For the full year, total revenues came in at $1.10 billion, up 7.3% on a reported basis, and at 7.1% at CER.

Geographical & Segmental Details

In the quarter under review, revenues at the U.S. Spinal Hardware business increased 4.5% year over year to $156.6 million. This revenue upside was contributed by product launches like expandable, titanium and Porous PEEK implants, TLIF and XLIF Modulus, COHERE and COALESCE, TLX 20 Degree expandable cage, and RELINE Small Stature.

Revenues in the U.S. Surgical Support business were $75.3 million in the fourth quarter, up 8.9% year over year. This upside was driven by 12.9% year-over-year growth of organic revenues in the NCS, excluding the $5-million contribution from the SafePassage acquisition.

Within the Biologics segment, there was a sequential revenue increment of 4% over the third quarter, even though the business line faced a 6.5% year-over-year decline. The Biologics segment has made strong strides on account of the increased sales of its products in majority of spine and orthopedic cases.

In the fourth quarter, the company registered international revenues amounting to $56.4 million, reflecting 11% year-over-year growth at CER. The EMEA region witnessed growth of 11.1% year over year at CER. This upswing stemmed from recurring investments in Germany and ongoing synergies with a Swiss acquisition. Solid revenue growth in the Southern (NYSE:SO) Europe region came primarily from Italy and Spain.

The revenues from the Asia-Pacific region grew 9.5% at CER, fueled primarily by new surgeon conversion in Japan, Australia and New Zealand. Revenues from Latin America climbed 18% at CER, banking on an increase in procedural volumes and continued recovery in Puerto Rico.

Margin Details

In the reported quarter, gross profit improved 3.2% year over year to $202.2 million. However, gross profit margin contracted 210 basis points (bps) to 70.1%. Adjusted operating profit declined 11.9% from the year-ago period to $42.9 million owing to year-over-year rise in operating expenses. Accordingly, adjusted operating margin shrunk 306 bps to 14.9% in the quarter under review.

Operational Update

The company exited 2018 with cash and cash equivalents of $117.8 million, up from $72.8 million at the end of 2017. Net cash provided by operating activities at the end of 2018 was $219.2 million as compared to $176.9 million.

Guidance for 2019

NuVasive has provided its guidance for 2019. The revenues have been estimated to be in the range of $1.14-$1.16 billion. The Zacks Consensus Estimate for 2019 revenues is $1.17 billion, which lies above the higher-end of the guided range provided by the company. The company expects the adjusted EPS for 2019 to be in the $2.20-$2.30 range. The Zacks Consensus Estimate for this metric is $2.45, which falls above the higher-end of the guided range.

Our Take

NuVasive exited 2018 on an overall promising note with better-than-expected numbers. The company witnessed balanced revenue growth across all its key operating segments. Robust sales figures in international markets buoy optimism. We are upbeat about the company having witnessed strong demand across several of its recently-launched products in the U.S. Spinal Hardware business.

On the flip side, the contraction in the margins is disappointing.

Zacks Rank & Key Picks

NuVasive carries a Zacks Rank #3 (Hold). A few top-ranked medical stocks that have reported quarterly results in the recently are Abbott Laboratories (NYSE:ABT) , AngioDynamics Inc. (NASDAQ:ANGO) and CONMED, Corp. (NASDAQ:CNMD) .

Abbott reported fourth-quarter 2018 adjusted EPS of 81 cents, in line with the Zacks Consensus Estimate. Revenues of $7.77 billion missed the Zacks Consensus Estimate of $7.79 billion. The stock has a Zacks Rank #2 (Buy).

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, beating the consensus estimate by 2.9%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million beat the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of #2.

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