Globus Medical (GMED) Gains From New Launches Amid Macro Issues

Globus Medical GMED continues to gain from surging demand for its Musculoskeletal Solutions products. Meanwhile, the company is expanding in the overseas markets through the expansion of direct and distributor sales force. Yet, we are worried about a challenging macroeconomic scenario that continues to plague Globus Medical's profit margins. It has a Zacks Rank #3 (Hold) at present.

GMED 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.
The company is particularly seeing notable gains across its product portfolio in expandables, biologics, MIS screws, 3D printed implants and cervical offerings. Over the past couple of quarters, this business has registered above-market growth, driven by competitive rep recruiting from prior quarters and robotic pull-through.
In the fourth quarter, Legacy Globus' musculoskeletal revenues surged 11.8%. The growth was led by the company's U.S. and international spine businesses, as well as continued share growth within trauma.
Earlier, Globus Medical launched three new products — REFLECT, MARVEL and Ossifuse. The company continues to make significant progress in launching its prone, lateral patient positioning system. As the company moves into 2024, it anticipates a strong cadence of product launches throughout the Musculoskeletal portfolio.

Globus Medical, Inc. Price

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Globus Medical merged its business with NuVasive. The combined company forms a global musculoskeletal business, focused on rapid innovation, addressing unmet clinical needs and improving offerings to surgeons and patients. It capitalizes on GMED's complementary commercial organization and should allow the company to accelerate its globalization strategies to increase customer reach and strengthen surgeon relationships.
The combined company is working to bring the best-in-class technologies to create a differentiated and comprehensive procedural solution offering as part of its approach to address unmet clinical needs and support surgeons and patients. According to Globus Medical, both the companies' operational footprints are highly complementary, allowing them to better leverage each other's manufacturing and supply-chain resources to increase internal production while reducing the amount of required stand-alone capital investment. This way, they can redirect investments and improve cash flow.
In terms of the latest development, NuVasive stand-alone sales for the fourth quarter were up 2% on a pro forma basis. This was primarily driven by continued market penetration in the international spine with 14% growth, market re-entry of key technology of NuVasive Specialty Orthopedics delivering 26% gains, and strengthening NuVasive Clinical Services increasing 6% from the prior- year level.

On the flip side, Globus Medical, like other industry players, is currently fighting negative trends in the global economy, including interest rate fluctuations, increases in inflation and financial market volatility. These factors are adversely impacting the company's operations and financial performance. The global inflation, in particular, has led to a significant rise in the cost of raw materials for the company. In the fourth quarter, GMED witnessed a 276.1% surge in the cost of goods sold.
These macroeconomic factors, along with the rising wage and raw material costs, are also leading to a significant escalation in the company's operating expenses. SG&A expenses in the reported quarter were up 107.3% from the year-ago quarter's level. Research and development expenses increased 167.9% year over year.

Meanwhile, the presence of a large number of players made the musculoskeletal 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.

Key Picks

Some better-ranked stocks in the broader medical space are DaVita DVA, Stryker SYK and Cardinal Health CAH. While DaVita presently sports a Zacks Rank #1 (Strong Buy), Stryker and Cardinal Health carry a Zacks Rank #2 (Buy) each.

DaVita's shares have risen 65.3% in the past year. Earnings estimates for DaVita have risen from $8.97 per share to $9.23 in 2024 and from $9.77 to $10.01 in 2025 in the past 30 days.

DVA's earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 35.6%. In the last reported quarter, it posted an earnings surprise of 22.2%.

Estimates for Stryker's 2024 earnings per share EPS have remained constant at $11.86 in the past 30 days. Shares of the company have risen 21.5% in the past year compared with the industry's growth of 4,6%.

SYK's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.1%. In the last reported quarter, it delivered an earnings surprise of 5.8%.

Estimates for Cardinal Health's 2024 EPS have moved up to $7.29 from $7.28 in the past 30 days. Shares of the company have surged 45% in the past year compared with the industry's 11.7% growth.

CAH's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. In the last reported quarter, it delivered an earnings surprise of 16.7%.

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