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Wright Medical (WMGI) Reports Q3 Loss, Raises ’18 Guidance

Zacks

Wright Medical Group N.V. WMGI reported third-quarter 2018 adjusted loss of 9 cents, narrower than the Zacks Consensus Estimate of a loss of 15 cents. Notably, the company reported loss of 16 cents in the year-ago quarter.

Third-quarter revenues came in at $194.1 million, which beat the Zacks Consensus Estimate by 4.2%. Revenues also improved 13.8% year over year. The stock sports a Zacks Rank #1 (Strong Buy).

Segment Details

Lower Extremities


This segment posted worldwide revenues of $71.1 million, up 8.8% year over year. Sales in the United States increased 12% to $57.6 million on a year-over-year basis. International sales totaled $13.5 million, down 3.3% year over year.

Wright Medical Group N.V. Price and Consensus

Upper Extremities

Revenues in the segment totaled $91 million, up 19.8% from the prior-year quarter’s level. In the United States, sales were up 19.2% on a year-over-year basis to $65.3 million. Internationally, the segment raked in revenues worth $25.7 million, up 21.2% year over year.

Biologics

Worldwide Biologics sales were $27.2 million, up 14.1% on a year-over-year basis. While international revenues in the segment rose 26.1% to $6.5 million, U.S. sales were $20.7 million, up 10.8% year over year.

Sports Med & Other

The segment posted worldwide sales of $4.8 million, down 9.8% on a year-over-year basis. The segment’s U.S. sales declined 2.2% to $1.9 million, while international sales sunk 14.5% to $2.8 million.

Margin Analysis

In the quarter under review, gross profit totaled $139.2 million, up 5.9% year over year. Gross margin was 77.2% of net revenues, which contracted 30 basis points (bps) from the year-ago quarter’s level.

Selling, general and administrative expenses were $140.8 million, up 7.7% year over year.

Research and development expenses were $14.7 million, up 15.3% year over year.

Adjusted operating expenses in the third quarter of 2018 were $153.1 million, up 6.8% year over year.

Guidance Raised

Wright Medical increased revenue guidance in the band of $825-$828 million, up from the previous guidance of approximately $812-$822 million. This represents growth of 11-12% on a constant-currency basis. For 2018, the Zacks Consensus Estimate for revenues is pegged at $821.1 million, below the guidance.

The company expects 2018 adjusted loss per share within 8-3 cents, narrower than the previous guidance of 14-21 cents. The Zacks Consensus Estimate for the same is pinned at a loss of 15 cents, wider than the projected range.

Full-year adjusted EBITDA is anticipated in the range of $110-$116 million, higher than the previous range of $106-$113 million. The guidance has approximately 0.5% cushion from foreign currency exchange rates.

In Conclusion

Wright Medical exited the third quarter on a promising note. The company's loss was narrower than the consensus mark and revenues beat the same. Solid performance in the upper and the lower extremity segments buoy optimism. The FDA approval of the AUGMENT Injectable Bone Graft is also a major positive. The company has also witnessed strong growth in the Perform Reversed Glenoid platform. Further, contribution from the company’s SIMPLICITI shoulder system is noteworthy. Management is optimistic about the recent acquisition of BLUEPRINT. Wright Medical also launched INVISION Total Ankle Revision System.

On the flip side, the company’s rising operating expenses are a concern. Soft show by the sports business is discouraging. Distribution issues in Europe and Asia as well as foreign currency volatility add to the woes. Increased costs related to product launch and re-building infrastructure is expected to keep the margins under pressure.

Earnings of Other MedTech Majors at a Glance

Other top-ranked stocks in the broader medical space that also reported solid earnings this season are Intuitive Surgical ISRG, Stryker Corporation SYK and Merit Medical Systems, Inc. MMSI. Each of the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted EPS of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, which beat the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, beating the Zacks Consensus Estimate by a penny. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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