NuVasive (NUVA) Beats Q4 Earnings, Revenues; Guides 2017

NuVasive, Inc.NUVA reported fourth-quarter 2016 adjusted earnings per share (EPS) of 53 cents, reflecting a 51.4% surge from the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate by 6%.

Solid revenue growth primarily led to the year-over-year improvement in earnings.

Including one-time items, the company reported fourth-quarter 2016 net income per share of 11 cents, down 50% from 22 cents in the year-ago quarter.

Full-year 2016 adjusted EPS was $1.66, up 26.7% from the year-ago period and also higher than the Zacks Consensus Estimate by a couple of cents.

NuVasive, Inc. Price, Consensus and EPS Surprise

NuVasive, Inc. Price, Consensus and EPS Surprise | NuVasive, Inc. Quote

Revenues in the reported quarter increased 25.9% year over year to $271.1 million (up 25.5% at constant exchange rate or (CER), surpassing the Zacks Consensus Estimate of $263 million. The upside was driven by strong procedural growth in the U.S. as well as solid performance in international market.

Net sales in 2016 came in at $962.1 million, up 18.6% from 2015 (up 18.4% at CER). The figure also surpassed the Zacks Consensus Estimate of $953.6 million.

In the reported quarter, International business grew 45% year over year (up 42% at CER). Growth was backed by strong contributions from core direct markets including Japan, Australia, New Zealand, the U.K., Italy and Germany.

The company reported an 88 basis point (bps) contraction in gross margin to 75.3% in the fourth quarter. Despite the 24.5% rise in gross profit to $204.2 million, a 30.6% increase in cost of goods sold to $66.9 million impacted margins. Sales, marketing and administrative expenses went up 19.8% to $142.4 million, while research and development expenses increased 50.8% to $12.9 million.

NuVasive posted adjusted operating income of $48.7 million in the reported quarter, reflecting a 33.3% rise from the year-ago number. Adjusted operating margin expanded 99 bps to 17.9% in the reported quarter.

The company exited fiscal 2016 with cash, cash equivalents and short-term investments of $153.6 million, down from $357.7 million in the prior year.


NuVasive has provided full-year 2017 guidance, taking the integration effect of NSO and Biotronic into consideration.

The company currently expects 2017 revenues to grow double digits at 10.7% or 11.7% on a constant currency basis to approximately $1.065 billion, which is above the current Zacks Consensus Estimate of $1.06 billion.

NuVasive has also provided its guidance for full-year 2017 adjusted earnings per share at $2.00, up 20% from the 2016 number. The current Zacks Consensus Estimate of $2.07 is slightly above the company's guidance. Additionally, adjusted operating margin for the year is projected at 17.1%, up 100 bps on a year-over-year basis.

For first-quarter 2017, management expects revenues of around $250 million.

Our Take

NuVasive exited the fiscal 2016 on a solid note, with both earnings and revenues beating the Zacks Consensus Estimate.

The company saw double-digit growth in both Spinal Hardware and Surgical Support businesses, including NuVasive Specialized Orthopedics, or NSO, and Biotronic NeuroNetwork. Growth in the Spinal Hardware business reflects the strong acceptance of the platform across product areas within the Integrated Global Alignment (iGA) strategy, including Reline posterior fixation system, ALIF, Bendini and Integrated Operative Solutions.

Results were also driven by strength in NuVasive's procedural offerings including posterior lumbar, anterior, lateral and cervical, and the integration of the NSO portfolio which includes MAGEC for early onset scoliosis. The PRECICE technology for limb lengthening acquired with Ellipse Technologies is presently part of NSO, which also witnessed strong sales in the quarter.

Surgical Support business results were driven by the inclusion of Biotronic, which was acquired last July. Results benefited from the inclusion of NSO and Biotronic, both acquired in 2016 as part of the company's strategy to fortify its position in the spine market.

On the flip side, NuVasive's gross margin scenario is quite discouraging. Also, management's projection of a $10 million currency headwind on revenue growth continues to be a concern.

Zacks Rank & Key Picks

NuVasive currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks are Glaukos Corporation GKOS , Cardiovascular Systems CSII and Neogen Corp. NEOG . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Glaukos gained over 100% in the last one year in comparison to the S&P 500's gain of 26.2%. The company has a stellar four-quarter average earnings surprise of over 100%.

Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.

Neogen gained 37.8% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth rate of 16.7% for the next five years compared to the industry average of 15.2%.

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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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