Globus Medical Q2 Earnings Top Estimates, '24 View Up

Globus Medical, Inc. GMED reported second-quarter 2024 adjusted earnings per share of 75 cents, which beat the Zacks Consensus Estimate by 10.3%. The figure increased 19% year over year.

The adjusted EPS excludes certain non-recurring expenses and benefits, such as the amortization of intangibles, merger and acquisition-related costs/licensing and provision for litigation, among others.

Without adjustments, the company registered a GAAP diluted EPS of 23 cents, down 59.6% from the year-ago quarter's figure.

Revenues

Worldwide sales increased a staggering 115.9% year over year to $629.7 million. The reported figure exceeded the Zacks Consensus Estimate by 2.4%.

Net sales improvement was driven by the addition of NuVasive, as well as increased volumes of spine product sales and Enabling Technology products and services.

Geographic Details

Net sales generated in the United States increased 103.5% year over year (same at CER) to $499.5 million. Our model projected a 103.8% improvement in sales from this region.

Across international markets, revenues surged 182.3% (up 191.3%% at CER) to $130.2 million, which surpassed our model estimate of $112 million.

Product Category

Musculoskeletal Solutions generated revenues of $592.9 million, up 130.8% year over year, mainly driven by contributions from the NuVasive merger. Our model projected a year-over-year top-line improvement of 124.5% from this segment.

Enabling Technologies generated revenues of $36.8 million in the second quarter, up 5.7% from the prior-year reported figure. The growth was driven by increased sales of Excelsius GPS and the EGPS robotic system. The reported figure also surpassed our model estimate of $35.7 million. 

Margins

The gross profit in the reported quarter rose 71.8% year over year to $369.7 million. However, the gross margin contracted 1507 basis points (bps) to 58.7% on a 240% surge in the cost of sales.  

SG&A expenses in the reported quarter totaled $238.1 million, up 98.3% from the year-ago quarter's level. Research and development expenses increased 76.6% to $37.7 million.

Adjusted operating profit rose 27.3% from the year-ago quarter's figure to $93.8 million. Despite that, the adjusted operating margin contracted 1038 bps in the quarter to 14.9% due to increased operating expenses.

Cash Position

Globus Medical exited the second quarter of 2024 with combined cash and cash equivalents and short-term marketable securities of $410.4 million compared with $434.5 million at the end of the first quarter of 2024.

Cumulative net cash provided by operating activities at the end of the second quarter was $106.6 million compared with the year-ago figure of $88.3 million.

2024 Guidance

GMED updated its 2024 guidance.

The full-year net sales are projected to be in the band of $2.47-$2.49 billion (compared with the earlier projected range of $2.460-$2.485 billion). The Zacks Consensus Estimate is currently pegged at $2.48 billion.

The company's adjusted EPS for 2024 is now expected to be in the range of $2.80-$2.90 (up from the previously guided range of $2.75-$2.85). The Zacks Consensus Estimate is pegged at $2.82.

Our Take

Globus Medical exited the second quarter of 2024 with better-than-expected results, wherein both its earnings and revenue exceeded the Zacks Consensus Estimate. The integrated Globus-NuvaSive team is working together to develop and launch new products via meaningful collaborations, with the pace expected to accelerate in the coming months due to improved internal development processes.

U.S Spine outpaced market growth owing to the strength of the combined product offering, competitive rep recruiting from prior quarters and increased implant usage through robotic pull-through. Enabling Technologies benefited from higher robotic and imaging system sales. The raised outlook for 2024 buoys optimism.

However, escalating costs and expenses are leading to the contraction of both margins during the quarter.

Zacks Rank and Key Picks

Globus Medical currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Intuitive Surgical ISRG, Abbott Laboratories, Inc. ABT and Quest Diagnostics DGX.

Intuitive Surgical reported a second-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1 (Strong Buy).

Intuitive Surgical has a long-term earnings growth rate of 16.1% for 2024 compared with the industry's 14.1%. The company's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.97%.

Abbott, carrying a Zacks Rank #2 (Buy) at present, reported second-quarter 2024 earnings of $1.14 per share, which surpassed the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion topped the Zacks Consensus Estimate by 0.3%.

ABT has an earnings growth rate of 10.1% for 2025 compared with the S&P 500's 9.3%. The company beat on earnings in each of the trailing four quarters, the average surprise being 2.34%.

Quest Diagnostics, carrying a Zacks Rank #2 at present, reported a second-quarter adjusted EPS of $2.35, which surpassed the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion outpaced the Zacks Consensus Estimate by 0.5%.

DGX has a historical five-year earnings growth rate of 7.4% compared with the industry's 4.2%. The company's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.31%.

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