NuVasive Seen Mixed After Earnings Despite Stock’s Multi-Year Highs

NuVasive is a medical device outfit focused on making spinal surgeries minimally disruptive. The company showed that revenue increased 6.4% to $202.9 million. That gain would have been 8.5% on a constant currency basis. Its non-GAAP operating profit margin was 15.3%, with net income of $15.7 million and $0.31 in earnings per share. NuVasive raised guidance for full year 2015 margins, adjusted EBITDA and earnings.

Another boost to NuVasive is that it also announced reaching a definitive settlement agreement with the United States’ Department of Justice, the Defense Health Agency, the Office of Personnel Management, and the U.S. Department of Veteran Affairs. Under the terms of the settlement, which had previously been reached as an agreement in principle at the end of April, NuVasive will pay $13.5 million, plus fees and accrued interest.

So, how does everyone see NuiVasive after the report? We have two positive research calls, but we focused on the less positive call because it comes with a Hold rating and the stock is already up a lot today and this year.

Northland Securities raised its rating to Outperform from Market Perform after the call, but the firm kept its $68 price target. What stands out here is that the previously listed highest analyst price target was only $63.00 in the Thomson Reuters universe.

Canaccord Genuity did maintain at least some caution here. The firm raised its price target to $52 from $49, but that is still with the same prior Hold rating. The firm’s analyst William Plovanic thinks NuVasive is transitioning to investment mode and that manufacturing is the focus. He said:

We maintain our HOLD rating on NuVasive post Q2/15 results that outperformed our and consensus expectations. Solid execution in lumbar and cervical drove US implants/ services. OUS and US Biologics growth slowed in Q2 and with 2H/15 projected for more of the same. Management noted expectations for execution to continue into the H2/15 but cautioned for a disruption in OUS in the Q3/15 due to a turnover in OUS management. Longer-term opportunities exist from continued market acceptance of IGA in the US as well as improving growth in Europe. Lastly, management highlighted expectations to increase its internal manufacturing capabilities as well as seek out inorganic growth from OUS M&A. We view both initiatives positively, but note they will likely come at the expense of margin expansion.

One thing that investors might want to take notice of is that NuVasive shares have a consensus analyst price target of $54.40. This means that analysts are either likely to get more cautious or they have to raise price targets if they want their investors to stay in the game.

NuVasive shares were last seen up 8.5% at $54.75, and the stock hit a new high of $55.22 earlier on Wednesday. NuVasive has a 52-week range of $33.33 to $55.22.