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NuVasive: International Outlook Strong, Spine Prospects Bright

On Apr 11, we updated our research report on NuVasive, Inc. NUVA, a leading player in the global spine market, focused on developing minimally-disruptive surgical products and procedurally-integrated solutions for the spine. The stock currently carries a Zacks Rank #3 (Hold).

NuVasive expects its international business to grow by 38% at CER in 2016. Additionally, management believes that, despite some sales disruption in the fourth quarter, international growth will largely be buoyed by the company’s strategy of refocusing on market penetration over the long haul. NuVasive expects to see positive momentum from these efforts starting from the first quarter of 2016.

Moreover, the ample scope of growth in the spine market buoys optimism. According to management, in 2015 alone, NuVasive launched several new products in this space and expects to keep this trend alive even in the coming period.

Another important growth catalyst in this space is the company’s recent acquisition and inclusion of Ellipse Technologies and its products, focused on developing procedural solutions for complex skeletal deformity.

We note that, in its last-reported fourth quarter 2015, NuVasive delivered strong earnings and revenues numbers, both ahead of the Zacks Consensus Estimate. Despite disruptive sales performance in the international market, strong U.S. sales contributed to overall growth. We are particularly impressed with continued growth visible across all the product lines as well as the expansive geographic reach of the company.

On the flip side, pricing continues to be a major headwind. For 2016, the company projects a negative 1% pricing impact on gross margin, which is relatively consistent with last year’s trend. The competitive landscape also remains tough.

Key Picks from the Sector

Better-ranked stocks in the broader medical sector are Baxter International Inc. BAX, OraSure Technologies, Inc. OSUR and ResMed Inc. RMD. All the three stocks carry a Zacks Rank #2 (Buy).

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