Should Bioventus Stock Be in Your Portfolio Pre-Q3 Earnings?

Core Viewpoint - Bioventus (BVS) is set to report its third-quarter 2024 earnings, with sales and earnings estimates at $132.6 million and 6 cents per share, respectively. The company has shown strong earnings surprises in recent quarters, indicating positive momentum in its financial performance [1][3]. Financial Performance - The earnings estimates for Bioventus' 2024 and 2025 EPS have remained stable at 40 cents and 45 cents, respectively, over the past 60 days [1]. - Bioventus has delivered an earnings surprise of 171.43% in the last reported quarter, with an average surprise of 102.86% over the trailing four quarters [3][4]. Revenue Growth - The company is experiencing double-digit revenue growth in its Pain Treatments and Surgical Solutions segments, with organic sales rising nearly 14% year over year in Q2 2024 [8]. - Bioventus has raised its financial guidance for 2024, expecting net sales between $557 million and $567 million, significantly higher than the original guidance of $520-$535 million [16]. Profitability and Divestitures - Management is focusing on improving profitability by divesting lower-margin businesses, including the sale of its Wound business for $85 million and the Advanced Rehabilitation business for $45 million [9][10]. - These divestitures are expected to enhance margins and cash flow, with adjusted EBITDA increasing by 22% year over year and adjusted gross margin expanding by 180 basis points to 75.8% [10]. Liquidity and Debt Management - The proceeds from divestitures are improving Bioventus' liquidity position, with a net leverage ratio reduced to less than four, and plans to lower it to below three times by the end of 2025 [11]. - Investors are likely to seek updates on the company's progress regarding liquidity and financial efficiency targets [11]. Stock Performance and Valuation - Year-to-date, Bioventus stock has surged 147.8%, outperforming the industry and the S&P 500, which saw a decline of 5.9% [13]. - The stock is currently trading at a price/sales ratio of 1.56, lower than the industry average of 2.06, indicating it is trading at a discount [15]. Investment Thesis - The company's strategic focus on accelerating growth, enhancing profitability, and improving liquidity is yielding positive results, making Bioventus a compelling addition to investment portfolios [16].