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Why Is Globus Medical (GMED) Up 1.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Globus Medical (GMED). Shares have added about 1.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Globus Medical due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Globus Medical Q1 Earnings Miss Estimates, Margins Down

Globus Medical reported first-quarter 2022 adjusted earnings per share of 42 cents, missing the Zacks Consensus Estimate by 8.7%. The metric also fell short of the year-ago adjusted earnings per share by 13.1%.

The adjusted earnings per share excludes certain non-recurring expenses like amortization of intangibles, litigation and acquisition-related costs.

Without the adjustments, the company registered GAAP earnings per share of 37 cents per share, reflecting a decline of 15.9%.

Revenues

First-quarter 2022 worldwide sales totaled $230.5 million, up 1.4% year over year. The reported figure, however, missed the Zacks Consensus Estimate by 1.2%.

Quarterly Details

Sales generated in the United States during the quarter under review improved 1.6% year over year to $196.4 million. This was driven by growth within U.S. spine, partially offset by lower INR revenues related to robotic sales. Internationally, revenues were $34.1 million, unchanged year over year at CER.

Musculoskeletal Solutions products generated revenues of $217.4 million, up 2.4% year over year. Enabling Technologies product revenues of $14.9 million in the quarter reflected an 11.9% decline from the prior-year figure.

Margin

Gross profit in the reported quarter dropped 0.5% year over year to $171.4 million. The gross margin contracted 146 basis points (bps) to 74.3% due to a 7.5% rise in the cost of goods sold to $59.2 million.

Selling, general and administrative expenses in the reported quarter were $100.7 million, up 2.9% from the year-ago quarter. Research and development expenses rose 16.7% to $17.4 million.

Overall adjusted operating profit was $53.2 million, reflecting a 10.6% decline from the year-ago quarter. The adjusted operating margin contracted 309 bps in the quarter to 23.1%.

Cash Position

Globus Medical exited the first quarter of 2022 with cash and cash equivalents, and short-term marketable securities of $473.3 million compared with $443.4 million at the end of 2021.

Cumulative net cash provided by operating activities at the end of the first quarter of 2022 was $44.7 million compared with the year-ago figure of $63.6 million.

2022 Guidance

The company has reaffirmed its 2022 guidance.

Full-year net sales are projected to be $1.025 billion. The Zacks Consensus Estimate for the same is currently pegged at $1.03 billion.

The company’s adjusted earnings per share guidance for 2022 is $2.10. The Zacks Consensus Estimate for the same is also pegged at $2.10 currently.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Globus Medical has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Globus Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Globus Medical belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, Teleflex (TFX), has gained 5.2% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Teleflex reported revenues of $641.72 million in the last reported quarter, representing a year-over-year change of +1.2%. EPS of $2.88 for the same period compares with $2.87 a year ago.

Teleflex is expected to post earnings of $3.36 per share for the current quarter, representing a year-over-year change of +0.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Teleflex. Also, the stock has a VGM Score of B.


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