Wright Medical (WMGI) Down 7.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Wright Medical Group (WMGI). Shares have lost about 7.8% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Wright Medical due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Wright Medical Earnings Beat Estimates in Q2, Gross Margin Up

Wright Medical delivered second-quarter 2019 adjusted EPS of 2 cents, which beat the Zacks Consensus Estimate by a penny. The company had reported adjusted loss of 3 cents per share in the year-ago quarter.

The company’s second-quarter revenues totaled $229.7 million, which missed the Zacks Consensus Estimate of $233.5 million. The top line however improved 11.8% year over year.

Segment Details

Lower Extremities

This segment reported worldwide revenues of $83.8 million, up 11.5% year over year.

Revenues in the United States increased 12.4% to $66.8 million on a year-over-year basis. International revenues totaled $17 million, up 8.3%.

Upper Extremities

Revenues at this segment totaled $111.3 million, up 12.1% from the prior-year quarter’s level.

In the United States, revenues increased 14.2% on a year-over-year basis to $80.1 million. Internationally, the segment reported revenues worth $31.2 million, up 6.9% year over year.

Biologics

Biologics revenues amounted to $29.9 million in the quarter under review, up 11.6% on a year-over-year basis.

While international revenues at the segment declined 3.8% to $6.3 million, U.S. revenues summed $23.6 million, up 16.6% year over year.

Sports Med & Other

At this segment, net revenues came in at $4.7 million, up 13.7% on a year-over-year basis.

The segment’s U.S. revenues increased 16.1% to $2 million, while international revenues shot up 12.1% to $2.7 million.

Margin Analysis

In the quarter under review, gross profit totaled almost $181.4 million, up 13.5% year over year. Gross margin was 79% of net revenues, which expanded 100 bps from the year-ago quarter.

Selling, general and administrative expenses were $152.1 million, up 8% year over year.

Research and development expenses amounted to $18.8 million, up 27.9% year over year.

Operating income in the second quarter of 2019 was $2.7 million against operating loss of $1.7 million in the prior-year quarter.

Guidance

For 2019, Wright Medical expects revenues within $925 million to $930 million, lower than the earlier projected band of $954 million to $966 million.

Notably, the guidance calls for constant currency growth of 12% and organic growth of 101%. Additionally, Wright Medical expects a negative impact of foreign currency on its 2019 sales.

Adjusted EPS is projected within 15-20 cents, lower than the earlier communicated range of 17-25 cents.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted -16.67% due to these changes.

VGM Scores

At this time, Wright Medical has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Wright Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.