Why Is Wright Medical (WMGI) Up 1.9% Since Last Earnings Report?

It has been about a month since the last earnings report for Wright Medical Group (WMGI). Shares have added about 1.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Wright 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.

Wright Medical Earnings & Revenues Beat Estimates in Q4

Wright Medical reported fourth-quarter 2018 adjusted earnings of 11 cents per share, which surpassed the Zacks Consensus Estimate of 6 cents. Notably, the company’s adjusted earnings came in at 10 cents per share in the year-ago quarter.

Fourth-quarter revenues totaled $238.1 million, which outpaced the Zacks Consensus Estimate of $237.4 million. The top line also improved 9.4% year over year.

Segment Details

Lower Extremities

This segment posted worldwide revenues of $93.1 million, up 12.3% year over year.

Revenues in the United States increased 15% to $76.8 million on a year-over-year basis. International revenues totaled $16.2 million, up 0.9% year over year.

Upper Extremities

Revenues at this segment totaled $108.2 million, up 8.4% from the prior-year quarter’s level.

In the United States, revenues increased 9% on a year-over-year basis to $78.2 million. Internationally, the segment raked in revenues worth $30 million, up 7% year over year.

Biologics

Biologics revenues amounted to $31.4 million in the quarter under review, up 9.8% on a year-over-year basis.

While international revenues at the segment rose 8.6% to $7.4 million, U.S. revenues summed $24 million, up 10.1% year over year.

Sports Med & Other

At this segment, net revenues came in at $5.5 million, down 13.3% on a year-over-year basis.

The segment’s U.S. revenues decreased 15.3% to $2.6 million, while international revenues decreased 29.1% to $2.9 million.

Margin Analysis

In the quarter under review, gross profit totaled almost $189 million, up 11% year over year. Gross margin was 79.4% of net revenues, which expanded 110 basis points (bps) from the year-ago quarter’s level.

Selling, general and administrative expenses were $160.6 million, up 20.7% year over year.

Research and development expenses amounted to $16.7 million, up 27.4% year over year.

Adjusted operating income in the fourth quarter of 2018 was $11.6 million, 4.9% of net revenues.

Guidance

For 2019, Wright Medical issued its revenue guidance of $954-$966 million. This also represents 15-17% net revenue growth on a constant-currency basis, 11-13% increase on a pro-forma constant-currency basis and 10-12% improvement on an organic constant-currency basis.

The company expects 2018 adjusted earnings per share of 17-25 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -7.41% due to these changes.

VGM Scores

At this time, Wright Medical has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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, Wright Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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