On Dec 29, 2015, we updated our research report on NuVasive, Inc. NUVA. We are impressed with continued growth visible across all the product lines as well as the expansive geographic reach of the company.
NuVasive delivered a strong third-quarter 2015 with both earnings and revenues ahead of the Zacks Consensus Estimate. Despite disruptive sales performance in the international market, strong U.S. sales contributed to overall growth.
Based on market share-taking strategy, the company showed balanced growth in the U.S. and outside. We believe that the gradual shift in the spine market toward minimally invasive surgery and increase in international access to healthcare has provided NuVasive ample opportunity for accelerated growth outside the U.S.
In the third quarter of 2015, international growth was as strong as 13.1% at CER backed by strong contributions from Japan and Italy. Management believes, despite some expected sales disruption in the fourth quarter, international growth will continue on the company’s strategy of refocusing on market penetration efforts over the long term. NuVasive expects to see positive momentum from these efforts starting from the first quarter of 2016.
The ample scope of growth on offer in the spine market buoys optimism. According to NuVasive, the spine fusion market, including biologics, is estimated to be approximately $9 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 through the rest of 2015 as well.
On the flip side, pricing continues to be a major headwind for NuVasive.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 gross margin in 2015, relatively consistent with the 2014 trend.The competitive landscape also remains tough.
The stock currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some top-ranked stocks in the broader medical sector are INSYS Therapeutics, Inc. INSY, ICU Medical, Inc. ICUI and LeMaitre Vascular, Inc. LMAT. All the three stocks carry a Zacks Rank #1 (Strong Buy).
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