Wright Medical Group N.V. WMGI 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.
2018 at a Glance
For 2018, Wright Medical delivered revenues of $836.2 million, reflecting a year-over-year increase of 12.2%. The reported figure exceeded the Zacks Consensus Estimate of $834.7 million.
The Upper Extremities segment recorded sales of $395.8 million (47.3% of net revenues).
The Lower Extremities segment registered revenues of $311.5 million (37.3% of net revenues).
The Biologics segment's revenues totaled $108.8 million (13% of net revenues).
The Sports Med & Other segment recorded revenues of $20.1 million (2.1% of net revenues).
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.
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 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.
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.
For 2019, Wright Medical issued its revenue guidance in the band of $954-$966 million. The mid-point of $960 million is above the Zacks Consensus Estimate of $957.7 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. Notably, the mid-point of 21 cents is below the Zacks Consensus Estimate of 23 cents.
Wright Medical exited the fourth quarter on a promising note. The company's adjusted earnings and revenues outpaced Zacks Consensus Estimate. It expects to deliver double-digit, constant-currency net sales growth each year and maintain adjusted gross margin in the high 70% range every year.
Solid performance at the Upper and the Lower Extremities segments buoys optimism. Also, consistent growth in PERFORM Reversed glenoid and robust contributions from the SIMPLICITI shoulder system are impressive. Wright Medical is likely to gain from the upcoming launch of REVIVE revision shoulder system as well. Furthermore, management is confident about the recent acquisition of BLUEPRINT.
On the flip side, the Zacks Rank #2 (Buy) company's increasing operating expenses are worrisome. Additionally, the sports business performed disappointingly in the fourth quarter. Distribution issues in Europe and Asia as well as foreign currency volatility add to the woes. Increased costs related to product launch and re-building infrastructure is expected to keep the margins under pressure.
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