Globus Medical, Inc.’s GMED growth in the third quarter can be attributed to the robust prospect in the musculoskeletal space. The company’s merger with NuVasive is expected to generate significant synergies. Additionally, a strong liquidity position bodes well. Meanwhile, the impact of fierce competition raises concerns about the company’s operational results.

This Zacks Rank #2 (Buy) company has delivered an impressive market performance in the past year. GMED’s shares have surged 54.9%, outpacing the industry’s 4.2% growth and the S&P 500 composite’s 25.6% gain.

The renowned medical device company has a market capitalization of $11.23 billion. With an earnings yield of 3.6%, it grossly outpaces the industry’s -4.6% yield. GMED’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.65%.  

Let’s delve deeper.

Upsides for GMED

Strong Musculoskeletal Prospects: Globus Medical is gaining market share in the musculoskeletal solutions space, banking on the strong performance of its implantable devices, biologics, accessories, and unique surgical instruments used in an expansive range of spinal, orthopedic and neurosurgical procedures. The company is particularly seeing notable gains across its product portfolio in expandables, biologics, MIS screws, 3D printed implants and cervical offerings.

Globus Medical's proforma musculoskeletal revenues improved 5.4% in the third quarter. The growth was driven primarily by strong contributions from the company’s U.S. and international spine businesses. Enabling Technologies revenues grew 39% year over year, driven by increased sales within the U.S. market across the EGPS and E3D products. The company also sold and shipped its first EHUB units. 

High NuVasive Integration Synergy: Globus Medical merged its business with NuVasive to form a global musculoskeletal company focused on accelerating innovation, addressing unmet clinical needs, and improving offerings to surgeons and patients. It is working to bring the best-in-class technologies to create a differentiated and comprehensive procedural solution offering as part of its approach to addressing unmet clinical needs and supporting surgeons and patients.

In terms of the latest development, the combined trauma and NSO business delivered 99% growth in the third quarter, driven by the continued strong performance and market penetration of the base trauma business and the fast uptake of the NuVasive specialty orthopedic growth.

Strong Liquidity, Solvency and Capital Structure: Globus Medical exited the third quarter of 2024 with combined cash and cash equivalents and short-term marketable securities of $695 million. The company ended the quarter with short-term debt of $437 million, lower than the cash balance. GMED has no long-term debt on its balance sheet. This is good news, particularly during an overall tough macroeconomic scenario when the company faces a global manufacturing and supply disruption.

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Factors Weighing on GMED

Competitive Landscape: The presence of a large number of players made the musculoskeletal devices market intensely competitive. The orthopedic industry, in particular, is highly competitive with the presence of more prominent players. Globus Medical needs to constantly introduce or acquire new products to withstand the competitive pressure and maintain its market share.

GMED Estimate Trend

Estimates for Globus Medical’s 2024 earnings per share (EPS) have moved north 0.7% to $2.97 in the past 30 days.

The Zacks Consensus Estimate for 2024 revenues is pegged at $2.50 billion, suggesting a 59.2% rise from the year-ago reported number.

Other Key Picks

Some other top-ranked stocks in the broader medical space are Haemonetics HAE, Penumbra PEN and ResMed RMD.

Haemonetics has an earnings yield of 5.02% compared with the industry’s 1.18%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 19.39%. HAE’s shares have risen 3.6% compared with the industry’s 19.9% growth in the past year.

HAE carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Penumbra, carrying a Zacks Rank #2 at present, has an estimated 2024 earnings growth rate of 33.5% compared with the industry’s 15.9%. Shares of Penumbra have risen 3.2% compared with the industry’s 14.5% growth in the past year. PEN’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 10.54%.

ResMed’s earnings are expected to increase 8.9% in fiscal 2025. Its shares have surged 115.8% compared with the industry’s 32.2% growth in the past year. RMD’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 6.41%. 

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