News

Globus Medical, Inc. GMED is well-poised for growth in the coming quarters, backed by expansion in theglobal marketto address the unmet demand for musculoskeletal devices. The company’s performance continues to be driven by above-market growth in the U.S. spine business, rising international momentum and the strong performance of trauma.

Forex woes and competitive disadvantages are a concern for GMED’s operations.

In the past year, this Zacks Rank #3 (Hold) stock has gained 21.1% compared with 7.3% growth of the industry and a 26% rise of the S&P 500 composite.

The renowned medical device company has a market capitalization of $8.99 billion. GMED’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 10.79%.

Let’s delve deeper.

Upsides

Musculoskeletal Prospects Strong: Globus Medical is gaining market share in the musculoskeletal solutions space, banking on the strong performance of its implantable devices, biologics, accessories and unique surgical instruments used in an expansive range of spinal, orthopedic and neurosurgical procedures.
In the first quarter, Globus's musculoskeletal revenues surged by 124.8%. The upside can be attributed to contributions from the NuVasive merger. The company’s U.S. and international spine businesses and continued share growth within trauma further contributed to the uptick.

Industry Prospects Impressive: Per Transparency Market Research, with a substantial increase in the prevalence of musculoskeletal disorders across the world, the global musculoskeletal diseases market has been witnessing a tremendous rise in size and valuation.

A report by Industry ARC states that the Global musculoskeletal diseases market is estimated to reach $7.9 billion by 2027 and is poised to witness a CAGR of 6.9% over the forecast period of 2022-2027.

Strong Liquidity, Solvency and Capital Structure: Globus Medical exited first-quarter 2024 with combined cash and cash equivalents and short-term marketable securities of $434 million compared with $518 million at the end of 2023. The company ended the quarter with no debt on its balance sheet. This is good news, particularly during an overall tough macroeconomic scenario when the company faces a manufacturing and supply disruption globally.

Raised Guidance: For full-year 2024, Globus Medical’s net sales are projected in the band of $2.460-$2.485 billion (earlier $2.450-$2.475 billion). The Zacks Consensus Estimate is currently pegged at $2.46 billion.

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The company’s adjusted earnings per share guidance for 2024 is in the range of $2.75-$2.85 (previously $2.68-$2.70). The Zacks Consensus Estimate is pegged at $2.69.

Downsides

Competitive Landscape: The presence of a large number of players made themusculoskeletal devices market intensely competitive. The orthopedic industry, in particular, is highly competitive with the presence of more prominent players like Zimmer Biomet, Stryker, Johnson & Johnson’s DePuy, Smith & Nephew and Medtronic. Globus Medical needs to constantly introduce or acquire new products to withstand the competitive pressure and maintain its market share.

Exposure to Currency Movement: In 2023, Globus Medical generated 18.4% of its sales from the international market. A significant portion of the company’s foreign revenues and expenses is generated in Japan, the Eurozone, the U.K. and Australia. This makes it highly vulnerable to currency fluctuations. During first-quarter 2024, currency translation had a 3.4% adverse impact on the company’s international revenues.

Estimate Trend

The Zacks Consensus Estimate for GMED’s 2024 earnings per share (EPS) has moved up from $2.67 to $2.82 in the past 60 days.

The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $2.47 billion, suggesting a 57.8% surge from the year-ago reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Medpace MEDP, ResMed RMD and Encompass Health Corporation EHC.

Medpace, sporting a Zacks Rank #1 (Strong Buy), reported first-quarter 2024 EPS of $3.20, beating the Zacks Consensus Estimate by 30.6%. Revenues of $511 million increased 17.7% from last year’s comparable figure. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medpace has an estimated 2024 earnings growth rate of 26.5% compared with the industry’s 12.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 12.8%.

ResMed, sporting a Zacks Rank #1, registered first-quarter 2024 EPS of $2.13, topping the Zacks Consensus Estimate by 10.9%. Revenues of $1.20 billion surpassed the Zacks Consensus Estimate by 1.9%.

RMD has an estimated fiscal 2024 earnings growth rate of 17.9% compared with the industry’s 15.7%. In each of the trailing four quarters, the company delivered an average earnings surprise of 2.8%.

Encompass Health, carrying a Zacks Rank #2, posted first-quarter 2024 adjusted EPS of $1.12, surpassing the Zacks Consensus Estimate by 20.4%. Net operating revenues of $1.3 billion topped the Zacks Consensus Estimate by 3.6%.

EHC has an estimated long-term earnings growth rate of 15.6% compared with the industry’s 11.7% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.7%.

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