On May 8, 2015, we updated our research report on NuVasive, Inc.NUVA . We are impressed with continued strong growth visible across all the product lines and the expansive geographic reach of the company.
NuVasive delivered a strong first-quarter 2015 with both earnings and revenues ahead of the Zacks Consensus Estimate. Based on market share-taking strategy, the company showed balanced growth in the U.S. and outside.
While the U.S. Implants and Services and biologic continued to grow well, NuVasive demonstrated strong performance in Asia-Pacific (especially Japan and Australia), Latin America and EMEA. According to the company, the gradual shift in the spine market toward minimally invasive surgery procedures and the increase in international access to healthcare has provided NuVasive with huge opportunity for accelerated growth outside the U.S.
The ample scope of growth on offer in the spine market also buoys optimism. According to NuVasive, the spine fusion market, including biologics, is estimated to be approximately $9.0 billion globally in 2015. This market is gradually experiencing greater adoption and increasing demand for the company's line of surgical alternatives that offer less tissue disruption.
In addition, a strong financial position allows NuVasive to enhance shareholders' value. The company has been experiencing solid margin expansion primarily on the back of continued strong operational gains driven by improved asset efficiencies. NuVasive expects this growth process to continue in 2015 as well.
On the flip side, pricing continues to be a major headwind for NuVasive. The company has been witnessing declining prices for its products due to intense competition in the spine market; pricing pressure experienced by hospital customers; and increased market power of hospital customers as the medical device industry consolidates.
For 2015, while the company expects continued progress from in-sourcing efforts that should drive approximately 50 basis points of improvement, this may be dampened by continued mix and pricing pressure. NuVasive projects a negative 2% pricing impact on the gross margin in 2015, which is relatively consistent with 2014. Also, the competitive landscape remains tough.
The stock currently carries a Zacks Rank #2 (Buy).
Key Picks from the Sector
Some other top-ranked stocks in the broader medical sector are Hospira Inc. HSP , Vascular Solutions Inc. VASC and Bio-Rad Laboratories, Inc. BIO . All of these three stocks carry a Zacks Rank #1 (Strong Buy).
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