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Here's Why You Should Hold on to NuVasive (NUVA) Stock Now

Zacks Equity Research
·4-min read

NuVasive, Inc. NUVA has been gaining on product launches as well as a flourishing international business. Its solid first-quarter 2020 results buoy optimism. However, coronavirus-led procedural deferrals and a tough competitive landscape are concerning.

Over the past year, the Zacks Rank #3 (Hold) stock has gained 0.4% versus the industry’s 6.6% fall and the S&P 500’s 5.2% rise.

The renowned surgical spine player has a market capitalization of $2.97 billion. The company projects 13.4% growth for the next five years and expects to maintain its strong performance. The company surpassed estimates in all of the trailing four quarters, the average positive surprise being 18.7%.


Let’s delve deeper.

Potential in Spine Market: NuVasive is currently on track to launch more than a dozen new products this year, spanning from solutions in core implant and fixation product lines to enabling technologies to support adoption of minimally-invasive surgery.

NuVasive, in June, announced the global commercial availability of Reline 3D, which is a posterior fixation system for patients suffering from pediatric spinal deformities.

Strength in International Business: We are optimistic about NuVasive’s tremendous growth opportunity in the international region. In the first quarter, despite all coronavirus-led market disasters, the company registered international year-over-year revenue growth at constant exchange rate. This was driven by mid-double-digit growth in the Asia Pacific, led by Japan, where the COVID-19 impact was nominal in this period. Europe too delivered low single-digit net sales growth. Other regions continued to experience decent volumes through March.

Strong Q1 Results: NuVasive’s better-than-expected earnings in first-quarter 2020 buoy optimism. It also reported strong sales in some of the key international markets in the quarter. Expansion of adjusted operating margin buoys optimism.

Downsides:

Coronavirus-Led Procedural Deferrals Hurt Sales: The U.S. Spinal Hardware business revenues declined in the first quarter of 2020. Per the company, in the first two months of the quarter, its X360 system was tracking to deliver solid year-over-year growth. However, since mid-March, the business witnessed significant deferrals in elective surgical procedures due to COVID-19.

Stiff Competition: NuVasive competes with a large number of players, making the medical devices market intensely competitive. The orthopedic industry, in particular, is highly competitive with the presence of bellwethers like Medtronic.

Estimate Trend

NuVasive has been witnessing a positive estimate revision trend for 2020. Over the past 30 days, the Zacks Consensus Estimate for its earnings has moved 4.2% north to 74 cents.

The Zacks Consensus Estimate for its second-quarter 2020 revenues is pegged at $155.7 million, suggesting a 46.7% fall from the year-ago number.

Key Picks

Some better-ranked stocks from the broader medical space are Quest Diagnostics Incorporated DGX, Hologic, Inc. HOLX and QIAGEN N.V. QGEN.

Quest Diagnostics’ long-term earnings growth rate is projected at 7.6%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hologic’s long-term earnings growth rate is estimated at 7%. The company presently has a Zacks Rank #2.

QIAGEN’s long-term earnings growth rate is estimated at 12.2%. It currently sports a Zacks Rank #1.

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Quest Diagnostics Incorporated (DGX) : Free Stock Analysis Report
 
Hologic, Inc. (HOLX) : Free Stock Analysis Report
 
QIAGEN N.V. (QGEN) : Free Stock Analysis Report
 
NuVasive, Inc. (NUVA) : Free Stock Analysis Report
 
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Zacks Investment Research