NuVasive, Inc. is gaining from strength in the U.S. spinal hardware business. The company ended the fourth quarter of 2021 with better-than-expected revenues. Robust performances across several geographies buoy optimism. However, mounting operating expenses and pricing pressure raise apprehension.

Over the past year, the Zacks Rank #3 (Hold) stock has declined 13.9% against a 16.8% fall of the industry. Notably, the S&P 500 composite witnessed a 14.8% rise in the same period.

The renowned medical device company has a market capitalization of $2.89 billion. Its earnings for fourth-quarter 2021 missed the Zacks Consensus Estimate by 14.9%.

Over the past five years, the company registered earnings growth of 0.6%versus the industry’s 9.1% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate is estimated at 15.6%, compared with the industry’s growth expectation of 16.8% and the S&P 500’s estimated 11.4% growth.

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Let’s delve deeper.

Factors At Play

Spine Business Holds Potential: NuVasive is currently leaving no stone unturned to capture the fast-growing spine market. The U.S. spinal hardware business registered revenue growth of 3.4% year over year during the fourth quarter. Within U.S. spinal hardware, the company’s cervical franchise recorded net sales growth of 30% on a year-over-year basis, driven by C360 and the robust performance of the Simplify Disc.

For 2022, the company expects to see continued growth from its international core spine business, led by the teams in Europe, Japan and Asia-Pacific as well as from its NuVasive Specialized Orthopedics portfolio.

U.S. Surgical Support Prospects Strong: We are encouraged by the ongoing developments in the Surgical Support business. In January 2022, NuVasive received the FDA 510(k) clearance for expanded indications of use for Attrax Putty with its comprehensive thoracolumbar interbody portfolio for spine surgery. In its fourth-quarter earnings update, the company noted that the Pulse platform exceeded its full-year expectations for net sales. Within less invasive spine surgery, NuVasive continued to invest in comprehensive, procedurally integrated solutions.

Q4 Upsides: NuVasive exited the fourth quarter with a revenue beat. The year-over-year growth in revenues was driven by product introductions, particularly the Pulse platform and the C360 portfolio featuring the NuVasive Simplify Cervical Disc in the United States. The continued strong international performance and double-digit growth in NuVasive’s core Spine business across the Asia Pacific, Europe, and Latin America regions raise investor confidence. Further, the bullish 2022 guidance indicates the continuation of this positive trend.

Downsides

Escalating Expenses: NuVasive’s selling, general and administrative expenses rose 11.4%, while research and development expenses climbed 15.9% year over year in the fourth quarter. The rising operating expenses led to a contraction in adjusted operating margin, building pressure on the bottom line.

Dull Revenue Scenario: NuVasive’s fourth-quarter and full-year 2021 net sales reflected the continued impact of COVID-19 on elective procedures and hospital staffing shortages despite exhibiting improvement from the year-ago period. The company believes that its 2022 guidance is appropriately conservative as it assumes that COVID and related health care staffing shortages will remain impactful in 2022 as well.

Pricing Pressure Persists: Pricing remains a major headwind for NuVasive as it experiences declining prices for its products. This decline can be attributable to increasing competition in the spine market; pricing pressure experienced by hospital customers; and increased market power of hospital customers as the medical device industry consolidates.

Estimate Trend

Over the past 30 days, the Zacks Consensus Estimate for NuVasive’s 2022 earnings has moved down by 2.7% to $2.17.

The Zacks Consensus Estimate for 2022 revenues is pegged at $1.21 billion, suggesting a 6.7% rise from the year-ago reported number.

Key Picks

A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN Quick QuoteAMN - Free Report) , Henry Schein, Inc. (HSIC Quick QuoteHSIC - Free Report) and McKesson Corporation (MCK Quick QuoteMCK - Free Report) .

AMN Healthcare has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has outperformed its industry in the past year. AMN has gained 42.9% versus the 53.4% industry decline.

Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%. It currently has a Zacks Rank #2 (Buy).

Henry Schein has outperformed the industry over the past year. HSIC has gained 26.9% compared with the industry’s 8.2% rise over the past year.

McKesson has a long-term earnings growth rate of 11.8%. McKesson’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 20.6%, on average. It presently carries a Zacks Rank #2.

McKesson has outperformed the industry over the past year. MCK has gained 57.4% in the said period compared with 8.2% growth of the industry.