NuVasive Aims For Innovation, Global Growth Amid Woes

On May 29, we issued an updated research report on San Diego, CA-based NuVasive, Inc. (NASDAQ:NUVA) . The company is a major 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 exited the first quarter of 2017 on a mixed note, with earnings beating the Zacks Consensus Estimate and revenues in line with the mark. Per management, the low-margin business impacted the quarter’s performance. Also, foreign currency fluctuation had a considerable impact on sales.

This has been reflected through the company’s share price trend too. For the last three months, NuVasive has been trading below the Zacks categorized Medical - Products industry. The company lost 0.2% in this period against the broader industry’s 3.9% gain.

NuVasive is leaving no stone unturned to capture the fast growing spine market. During the first quarter of 2017, the company’s core U.S. spinal hardware business maintained the bullish trend by reporting 10% growth. The upside was driven by its NuVasive Specialized Orthopedics (NSO) business as well as a strong cervical portfolio, following the launch of cervical iGA in the fourth quarter of 2016.

The international region too holds tremendous growth opportunity for NuVasive. In the first quarter of 2017, business in Latin America saw growth of over 70%. European and Asia Pacific businesses also contributed significantly.

NuVasive’s focus on product development, mainly core implant offerings looks encouraging. During first-quarter 2017, the company launched first two interbody devices – MLX and TLX – used in lumbar fusion procedures. Its new UNYTE system and radiation-reducing X-ray technology called LessRay underwent successful base testing during the reported quarter. Recently, the company rolled out the new RELINE Trauma portfolio to address the estimated $100 million U.S. spine trauma fixation market.

However, NuVasive’s margin issues as well as intensifying competition from major peers remain concerns. In addition, macro-economic conditions and persistent pricing pressure are major downsides.

Key Picks

Better-ranked stocks in the broader medical sector are Luminex Corporation (NASDAQ:LMNX) , Inogen, Inc. (NASDAQ:INGN) and Edward Lifesciences, Inc. (NYSE:EW) . Luminex and Inogen sport a Zacks Rank #1 (Strong Buy), while Edward Lifesciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Luminex has an expected long-term adjusted earnings growth of almost 16.3%. The stock added roughly 8.9% over last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of roughly 84.2%.

Edward Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock roughly added 22% over the last three months.

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