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Medtech Player Bounds On Upgrade Amid Tax Reform, Acquisitions

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NuVasive ( NUVA ) popped early Thursday on an upgrade that cited the likelihood for tax reform to benefit its bottom line and several recent acquisitions that could boost sales in 2018 and 2019.

[ibd-display-video id=3062895 width=50 float=left autostart=true] In morning trading on the stock market today , NuVasive lifted 1.6%, near 61.70, after earlier rising as much as 3.4%. Needham analyst Mike Matson upgraded NuVasive to a buy rating from underperform, and set a 71 price target.

Consensus views for 2018 and 2019 have come down since Aug. 28, 2017, when Matson downgraded NuVasive to underperform. Now, expectations are "more realistic and likely conservative" in the wake of tax legislation and a pair of acquisitions by NuVasive.

For 2018, the consensus models NuVasive bringing in adjusted profit of $2.30 per share on $1.091 billion in sales. In the following year, adjusted income is expected to grow to $2.66 a share and sales are pegged at $1.16 billion.

Under new tax law, NuVasive's earnings per share could rise by 15% in 2018, Matson said. President Donald Trump passed the new tax laws around Christmas. The measure cuts the corporate tax rate to 21% from 35% and offers a cheaper route to repatriate cash.

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NuVasive now expects to pay a tax rate in the low-20% range vs. earlier views for 33%. Matson estimates this could increase NuVasive's 2018 adjusted per-share income by as much as 32 cents, or 15% - assuming a 23% tax rate and no medical device tax.

Further, "NuVasive has done several acquisitions that probably aren't fully factored into consensus revenue or (earnings per share) estimates," he said in a note to clients. "Vertera and SafePassage could add about 2% to NuVasive's 2018 revenue."

NuVasive acquired Vertera Spine in September and announced it had entered an agreement to acquire SafePassage in December. The terms of both deals were not made public, though Matson expects Vertera to add about 0.5% to sales in 2018.

"We think that SafePassage's revenue may be more significant," he said. "When NuVasive acquired Biotronic Neuronetwork in 2016 it supported over 45,000 procedures annually with revenues of over $50 million, or $1,100 per procedure."

Based on this, Matson expects SafePassage has $14 million in revenue and sees it adding about 1.4% to NuVasive's sales in 2018.

Matson raised his 2018-19 model on NuVasive to $1.101 billion and $1.17 billion in sales, respectively. He sees NuVasive pulling in adjusted earnings of $2.54 per share and $2.84 a share in 2018 and 2019, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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