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NuVasive: Q3 Results Lack Shine, Spine Market Holds Promise


On Nov 28, we issued an updated research report on San Diego, CA-based NuVasive, Inc. NUVA. The company is a major player in the global spine market, focused on developing minimally-disruptive surgical products and procedurally-integrated solutions for the spine. NuVasive’s current product portfolio is focused on applications for spine fusion surgery.

Over the last six months, NuVasive outperformed the broader industry by 16.6%. However, the company has an unfavorable estimate revision trend for the current fiscal with five estimates moving downward compared to one estimate moving in the opposite direction. Current estimate accordingly has slipped down by $0.01 over the past couple of months, indicating alarming woes ahead.

NuVasive recently posted unimpressive third-quarter results, with both earnings and revenues missing the Zacks Consensus Estimate. It has also narrowed its full-year 2016 guidance on looming concerns. The company currently expects 2016 revenues of approximately $952 million, lower than the earlier guidance of $962 million. The outlook is below the current Zacks Consensus Estimate of $962.5 million. Also, in case of EPS, the current Zacks Consensus Estimate of $1.65 is above the company’s guidance of $1.64.

We are also concerned about NuVasive’s margin issues as well as intensifying competition from major peers. Macro-economic conditions and persistent pricing pressure are major downsides.

On a positive note, NuVasive has huge prospects in the global spine market. The company’s recent inclusion of NSO portfolio which includes MAGEC for early onset scoliosis is a vital catalyst. The PRECICE technology for limb lengthening, acquired as part of Ellipse Technologies, is presently part of NSO and has also witnessed strong sales in the third quarter. Also, according to management, the inclusion of the recently acquired Biotronic should double the footprint of the company’s service business across the U.S. and will also strengthen its spine market.

We are also upbeat about the company’s flourishing global business. The gradual shift in the spine market toward minimally-invasive surgery and increased international access to healthcare has led to accelerated growth outside the U.S.

Zacks Rank & Key Picks

NuVasive currently carries a Zacks Rank #3 (Hold). Better-ranked medical stocks are NxStage Medical Inc. NXTM, Baxter International Inc. BAX and Bovie Medical Corporation BVX. NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NxStage Medical surged 32.5% over the last one year compared to the S&P 500’s 5.8% over the same period. The company has a four-quarter average positive earnings surprise of 50.00%.

Baxter International rallied 23.8% over one year, much higher than the S&P 500. It has a trailing four-quarter average positive earnings surprise of 27%.

Bovie Medical recorded a 107.2% gain in the past one year, way better than the S&P 500. The company has a trailing four-quarter positive average earnings surprise of 28.7%.

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