Globus Medical (GMED) Up 7.4% Since Last Earnings Report: Can It Continue?

Core Viewpoint - Globus Medical reported strong earnings and revenue growth in Q1 2024, driven by the acquisition of NuVasive and increased sales in spine products and enabling technologies, although margins contracted due to rising costs [2][4][8]. Financial Performance - Adjusted earnings per share (EPS) for Q1 2024 were 72 cents, exceeding the Zacks Consensus Estimate by 30.9% and reflecting a 35.8% year-over-year increase [2]. - Total revenues for the quarter reached $606.7 million, marking a 119.3% year-over-year increase and surpassing the Zacks Consensus Estimate by 3.4% [4]. - The company reported a GAAP diluted loss of 5 cents, compared to an EPS of 48 cents in the previous year [3]. Revenue Breakdown - U.S. net sales increased by 106.3% year-over-year to $482.9 million, while international revenues surged by 190.7% to $123.7 million [5]. - Musculoskeletal Solutions generated revenues of $574.7 million, up 128.4% year-over-year, primarily due to the NuVasive merger [6]. - Enabling Technologies reported revenues of $32 million, a 27.5% increase from the prior year [7]. Margin Analysis - Gross profit rose 77.4% year-over-year to $365.2 million, but gross margin contracted by 1,421 basis points to 60.2% due to a 241% increase in the cost of sales [8]. - Adjusted operating profit fell 5.1% year-over-year to $59.2 million, with the adjusted operating margin contracting by 1,278 basis points to 9.8% [9]. Cash Position - At the end of Q1 2024, the company had combined cash and cash equivalents of $434.5 million, down from $517.8 million at the end of 2023 [9]. - Cumulative net cash provided by operating activities was $52.4 million, slightly down from $53.3 million year-over-year [10]. 2024 Guidance - The company updated its full-year net sales guidance to a range of $2.460 billion to $2.485 billion, with adjusted EPS guidance revised to $2.75 to $2.85 [11]. - The Zacks Consensus Estimate for net sales is currently pegged at $2.46 billion, while the adjusted EPS estimate is at $2.69 [11]. Market Position - Globus Medical holds a Zacks Rank 3 (Hold) and has a strong aggregate VGM Score of A, indicating positive growth and momentum [12][13]. - In comparison, Avanos Medical, a peer in the medical instruments industry, reported a revenue decline of 13.4% year-over-year, highlighting Globus Medical's stronger performance [14].