Wright Medical (WMGI) Down 3.1% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Wright Medical Group N.V. WMGI. Shares have lost about 3.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted 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 Posts Wider-than-Expected Loss in Q1

Wright Medical reported adjusted loss of $0.09 per share in the first quarter of 2017, wider than the Zacks Consensus Estimate of a loss of $0.08.

However, loss narrowed by $0.03 on a year-over-year basis.

Net sales in the first quarter totaled $177 million which was below the consensus mark of $182 million.

Meanwhile, in three of the last four quarters, the company posted positive earnings surprises, the average being 20.4%. Currently, the stock has a Zacks Rank #4 (Sell).

Q1 Highlights

Wright Medical launched PERFORM Reversed Glenoid Shoulder System in the quarter, a significant addition to its Upper Extremities portfolio.

The company’s flagship platforms – SIMPLICITI and ASCEND FLEX shoulder systems – recorded considerable growth and also hold promise.

Notably, the INFINITY total ankle replacement system and SALVATION limb salvage system (for treating Charcot foot) boosted Wright Medical’s trajectory in the first quarter.

Quarter in Detail

Wright Medical currently reports revenues under the Total Extremities & Biologics segment.

Consolidated sales at the segment in the U.S. increased 6.1% from the year-ago quarter to almost $132.2 million. Internationally, sales in the extremities and biologics business were up 0.6% year over year to $45 million, driven by strong growth in the Canadian and Australian markets.

Total Extremities & Biologics include four sub-segments, namely, Lower Extremities, Upper Extremities, Biologics and Sports Med & Other.

Lower Extremities: Sales at the segment decreased 2.4% on a year-over-year basis to $69.1 million in the quarter.

The U.S. lower extremities business sales increased 0.3% in the first quarter. However, the business faced revenue dis-synergies of around 5% in the quarter.

Internationally, lower extremities sales fell 12.2% on a year-over-year basis.

Upper Extremities: Sales at the segment jumped 10.4% on a year-over-year basis to $78.3 million in the quarter under review.

The U.S. upper extremities business grew 11.9% on a year-over-year basis, courtesy of continued strength in the company’s shoulder portfolio. With the addition of PERFORM Reverse, the company forecasts solid growth at the segment, specifically in the back half of the year. Wright Medical also plans for additional rollout of PERFORM Reverse sets going ahead.

Upper extremities sales increased 6.9% on a year-over-year basis internationally.

Biologics: Sales at the segment rose 11.6% on a year-over-year basis to $23.8 million in the quarter.

The U.S. biologics business grew 8.8% to $18.6 million in the quarter. Per management, growth at the segment lagged expectations due to sluggish sales performance by the company’s flagship AUGMENT Bone Graft platform.

Sales at the segment grew a notable 23.2% internationally on a year-over-year basis.

Sports Med & Other: Sales at the segment dropped 4.3% to $5.9 million from the year-ago quarter.

The U.S. sports med & other segment sales declined 1.7% and 5.7% internationally in the first quarter.

Margin Details

Adjusted gross margin, as a percentage of revenues, is pegged at 79.4% for the quarter, a contraction of roughly 90 basis points (bps) on a year-over-year basis.

Selling, general and administrative expenses accounted for 72% of total revenues in the first quarter, totaling $129.8 million, a contraction of 140 bps from the year-ago quarter.

Notably, expenses on Research and Development (R&D) were $12.4 million in the first quarter, almost flat on a year-over-year basis.

Guidance

Wright Medical reiterated its full-year guidance.

The company continues to expect net sales for full-year 2017 in the band of $755 million to $765 million, representing growth of 9% to 11%. This includes a negative impact from foreign currency exchange of approximately 2%. Notably, the midpoint of the net sales guidance represents constant currency growth of approximately 13%.

The company forecasts full-year 2017 adjusted EBITDA from continuing operations in the range of $78.5 million to $85.5 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Wright Medical Group N.V. Price and Consensus

 

Wright Medical Group N.V. Price and Consensus | Wright Medical Group N.V. Quote

VGM Scores

At this time, Wright Medical's stock has a strong Growth Score of 'A', though it is lagging on the momentum front with a 'D'. Charting a similar path, 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 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth investors based on our style scores.

Outlook

Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.

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