NuVasive Spikes 5% After-Hours On Sharp Procedure Rebound

Spine tech stock NuVasive (NUVA) has announced preliminary results for the second quarter 2020, sending shares 5% higher in Monday’s after-hours trading. Despite a significant revenue decline in the second quarter, volumes have improved in both May and June, NUVA revealed.

NUVA now estimates second quarter 2020 net sales to be in the range of $202 million to $205 million, reflecting a decline of approximately -30% compared to $292.1 million for the second quarter 2019. As a result, the company’s margins were negatively impacted. This still easily beat consensus estimates of $152M.

This reflects the impact of the widespread shutdown in elective surgical procedures in April as a result of the COVID-19 pandemic and government stay-at-home orders, says NuVasive, although surgical volumes increased in May and even further in June. 

In addition to the adverse impacts of the pandemic on sales, NUVA will also record $20 million to $25 million incremental charges primarily due to the pandemic, including charges related to inventory and accounts receivable.

As a result, NUVA is facing an operating loss for the second quarter 2020 in the range of -$35 million to -$40 million on a GAAP basis and -$17 million to -$23 million on a non-GAAP basis. Consensus for non-GAAP was at -$29M.

“For the second quarter 2020, case volumes decreased significantly in April, followed by an uptick in May and continued acceleration in June as lockdown restrictions eased and elective surgeries began to resume,” said J. Christopher Barry, CEO of NuVasive. “Although uncertainty remains around the COVID-19 pandemic, we saw positive signs of recovery and increased demand for elective procedures at the end of the quarter.”

As of June 30, 2020, NuVasive had cash, cash equivalents and short-term investments on hand of more than $920 million, and a revolving credit facility of $550 million, which was undrawn as of June 30, 2020.

“NUVA preannounced 2Q20 revenue that was well above consensus and indicated that its 2Q20 non-GAAP operating loss was also above consensus” commented Needham’s Mike Matson following the announcement. He has a $75 price target on NUVA (26% upside potential).

“We believe that this is an indication of a rapid procedure volume recovery in May and June… which we believe continued in July. Given the continued elective procedure volume recovery, we reiterate our Buy rating” the analyst told investors. He also noted that NUVA’s balance sheet remains strong and its cash burn in 2Q20 appears better than feared.

Overall the stock shows a Moderate Buy Street consensus, with an average analyst price target of $66 (13% upside potential). Shares are down 24% year-to-date. (See NUVA stock analysis on TipRanks)

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