Orthofix's (OFIX) Q1 Earnings Top Estimates, 2021 View Up

Orthofix Medical Inc. OFIX delivered first-quarter 2021 adjusted earnings per share (“EPS”) of 17 cents, up 88.9% from the year-ago figure. Moreover, the figure beat the Zacks Consensus Estimate by a stupendous 142.9%.

The one-time adjustments include expenses associated with long-term income tax rate adjustment, strategic investments and amortization of acquired intangibles, among others.

GAAP loss per share came in at 30 cents, down from the year-ago EPS of $1.32.

Total Revenues

Revenues in the first quarter totaled $105.6 million, up 0.7% year over year on a reported basis (down 0.8% at constant exchange rate or CER). However, the top line exceeded the Zacks Consensus Estimate by 10.7%.

The company, in the reported quarter, continued to register pandemic-led global headwinds during January and February. However, the top line was boosted by robust adoption of products and a sooner-than-expected rebound in procedures in March driven by easing of COVID-19-induced restrictions and rescheduling procedures from the weather delays in certain U.S. markets in February.

ORTHOFIX MEDICAL INC. Price, Consensus and EPS Surprise

ORTHOFIX MEDICAL INC. Price, Consensus and EPS Surprise

ORTHOFIX MEDICAL INC. price-consensus-eps-surprise-chart | ORTHOFIX MEDICAL INC. Quote

Segmental Details

In the reported quarter, Global Spine business revenues were flat year over year (down 0.3% at CER) at $82.3 million.

The Bone Growth Therapies (“BTG”) portfolio registered a 5.5% year-over-year fall in revenues (both on a reported basis and at CER), primarily due to the pandemic-led business disruptions and the fall in multilevel complex spine procedures during January and February.

The Spinal Implants portfolio surged 12.1% year over year on a reported basis and 11% at CER. This was driven by 19% growth in U.S. Spinal Implants revenues which largely resulted from strong M6-C artificial disc and FITBONE lengthening nail sales, and growth in both spine fixation and motion preservation product categories. Further, the U.S. Spine Fixation business was driven by increased adoption of new products.

Biologic portfolio’s revenues were down 1.8% year over year (both on a reported basis and at CER) to $13.7 million, primarily due to pandemic-led business disruptions and anticipated channel disruption.

Revenues from the Global Orthopedics (formerly known as Global Extremities) business were $23.3 million in the first quarter, up 3.3% year over year (down 2.5% at CER). The business experienced continued pandemic-led headwinds and shutdowns in certain European geographies, thus impacting procedure volumes during the quarter.

Margin Details

In the reported quarter, gross profit declined 2.1% year over year to $79.7 million. Gross margin contracted 221 basis points (bps) to 75.5%.

Sales and marketing expenses declined 6.5% year over year to $50.8 million, whereas general and administrative expenses fell 7.9% year over year to $16.4 million. However, research and development expenses climbed 9.4% year over year to $10.9 million.

Overall adjusted operating profit was $1.6 million, up from operating loss of $728,000 year over year.

Operational Update

The company exited the first quarter of 2021 with cash and cash equivalents of $94.6 million compared with $96.3 million at the end of 2020.

Net cash provided by operating activities at the end of the first quarter of 2021 was $ 2.4 million compared with the prior-year period’s $12.5 million.

Capital expenses incurred by the company at the end of the first quarter of 2021 were $4.8 million compared with $4.9 million a year ago. Accordingly, free cash outflow reported by the company at the end of the first quarter of 2021 was $2.3 million compared with the year-ago free cash inflow of $7.5 million.

2021 Guidance

Orthofix, despite pandemic-led restrictions, has upped its previously issued financial guidance for full-year 2021.

The company raised its revenue outlook for 2021 to the range of $455-$465 million, reflecting an increase of 11.9-14.4% on a reported basis, from 2020. This is significantly up from its earlier provided range of $445-$460 million, which reflected an increase of 9.5-13.1% on a reported basis from the comparable 2020 figure. The Zacks Consensus Estimate for the same is currently pegged at $450 million.

Adjusted EPS for 2021 is projected in the range of 52-62 cents, reflecting a surge of 100-138.5%, up from the earlier-provided guidance of 45-55 cents, reflecting an uptick of 73.1-111.5%. The Zacks Consensus Estimate for the same is currently pegged at 50 cents.

Our Take

Orthofix exited the first quarter of 2021 with better-than-expected results. Strength in the company’s Spinal Implants business, driven by robust U.S. Spinal Implants sales amid pandemic-led headwinds, looks encouraging. Robust product adoption also looks impressive. Orthofix performed the first cervical and lumbar procedures utilizing its new 3D-printed titanium interbody implants with Nanovate Technology, which buoys our optimism. The company’s exclusive licensing agreement with Italy-based IGEA S.p.A. to expand its BTG portfolio is also encouraging. The company’s provision of an upbeat outlook for 2021 amid the pandemic-led disruptions also raises our optimism.

However, disappointing performance of the overall Global Spine business, along with continued lower procedure volumes stemming from the pandemic, is discouraging. Moreover, contraction of gross margin also does not bode well.

Zacks Rank and Key Picks

Orthofix currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Boston Scientific Corporation BSX, CONMED Corporation CNMD and HCA Healthcare, Inc. HCA.

Boston Scientific reported first-quarter 2021 adjusted EPS of 37 cents, beating the Zacks Consensus Estimate by 23.3%. Net revenues of $2.75 billion outpaced the consensus estimate by 5.3%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CONMED, a Zacks Rank #2 company, reported first-quarter 2021 adjusted EPS of 63 cents, beating the Zacks Consensus Estimate by 46.5%. Revenues of $232.7 million outpaced the consensus mark by 7%.

HCA Healthcare reported first-quarter 2021 adjusted EPS of $4.14, surpassing the Zacks Consensus Estimate by 23.6%. Net revenues of $14 billion exceeded the Zacks Consensus Estimate by 2.2%. It currently carries a Zacks Rank #2.

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