NuVasive Inc. Earnings Cheat Sheet: Increased Costs Strains Margins

NuVasive, Inc. (NASDAQ:NUVA) reported a drop to a loss in the third quarter driven by higher costs. NuVasive is a medical device company focused on the design, development, and marketing of products for the surgical treatment of spine disorders.

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NuVasive Earnings Cheat Sheet for the Third Quarter

Results: Reported a loss of $67.6 million ($1.69 per diluted share) in the quarter. The medical instruments and supplies company had net income of $8.5 million or 21 cents per share in the year earlier quarter.

Revenue: Rose 10.5% to $132.9 million from the year earlier quarter.

Actual vs. Wall St. Expectations: NUVA reported adjusted net income of 26 cents per share. By that measure, the company beat the mean estimate of 13 cents per share. Analysts were expecting revenue of $134.2 million.

Quoting Management: Alex Lukianov, Chairman and Chief Executive Officer, said, “Our financial performance in the third quarter of 2011 attests to exceptional execution by the NuVasive team. In the face of an extremely challenging spine market, we delivered industry leading growth and executed a strategic transaction that will enhance the penetration of XLIF and NeuroVision for years to come. Our Impulse Monitoring acquisition increases our Intra-Operative Monitoring platform, allowing us to offer surgeons and hospitals complete procedural solutions in all areas of spine. With Speed of Innovation driving our market share taking strategy, we will continue to remain laser focused on pushing toward our next milestone of being a $1 billion company with increasing profitability to serve the needs of spine surgery patients.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 16.7%, with the biggest boost coming in the third quarter of the last fiscal year when revenue rose 26.7% from the year earlier quarter.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 2 cents in the second quarter, by 3 cents in the first quarter, and by 4 cents in the fourth quarter of the last fiscal year.

Gross margin shrank 1.6 percentage points to 80.4%. The contraction appeared to be driven by increased costs, which rose 20.6% from the year earlier quarter while revenue rose 10.5%.

The company’s loss in the latest quarter follows profits in the previous three quarters. The company reported a profit of $5.4 million in the second quarter, a profit of $2.4 million in the first quarter and $61.9 million in the fourth of the last fiscal year.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from 26 cents per share to 17 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. At 61 cents per share, the average estimate for the fiscal year has fallen from 76 cents ninety days ago.

Competitors to Watch: Alphatec Holdings, Inc. (NASDAQ:ATEC), Stryker Corporation (NYSE:SYK), Zimmer Holdings, Inc. (NYSE:ZMH), TranS1 Inc. (NASDAQ:TSON), Orthofix International NV (NASDAQ:OFIX), Medtronic, Inc. (NYSE:MDT), Exactech, Inc. (NASDAQ:EXAC), Wright Medical Group, Inc. (NASDAQ:WMGI), Orthovita, Inc. (NASDAQ:VITA), and RTI Biologics Inc. (NASDAQ:RTIX).

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(Source: Xignite Financials)