Weaker Sales Guidance Pushes NuVasive, Inc. Lower by 10%

By Markets Fool.com


Image source: NuVasive.

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What happened

Shares of NuVasive (NASDAQ: NUVA), a San Diego-based medical-device company that develops minimally invasive surgical products and procedural solutions for spinal surgery, were down by 10% during Wednesday's trading session as of 3 p.m. EDT. The culprits were weaker-than-expected sales during the third quarter and disappointing sales guidance.

So what

For the quarter, NuVasive delivered $239.6 million in revenue, a 19.5% increase from the prior-year period, and 18.9% growth on a constant-currency basis. Adjusted earnings also rose by 14.3%, to $0.40 per share, which met Wall Street's expectations. However, Wall Street had been counting on NuVasive to report $243.4 million in third-quarter revenue, thus falling shy of the mark by nearly $4 million.

NuVasive's chairman and CEO Gregory Lucier pointed to strong performance in the U.S., EU, and Australian markets, but keyed in on capital and stocking order shortfalls in the United States, as well as its XLIF dilator being off the market for part of the quarter in Japan, as reason for its weaker-than-expected revenue figure. Per Lucier, "If XLIF procedures in Japan had been performed at their normal pace, the underlying revenue growth rate of our core business would have been in the mid-to-high single digits."

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However, missing its Q3 sales expectations wasn't the end of it. NuVasive also updated its full-year guidance. Though it kept its adjusted full-year profit guidance unchanged at $1.64, representing 25% year-over-year growth, it reduced its revenue forecast for fiscal 2016 to $952 million from $962 million. The reduction in revenue primarily anticipates its dilator being off the market in Japan during the entirety of the fourth quarter.

Now what

Sometimes, Wall Street and investors take a "what have you done for me lately" approach to investing, and NuVasive's rather small miscue is responsible for knocking more than 10% off of its valuation today.But it's important to key in on what Lucier also said in the company's quarterly press release -- namely, in reference to the capital and stocking orders in the U.S., that "we believe this minor disruption is temporary."

Lucier added:"During the quarter, we continued to experience positive trends, including domestic procedural volumes in line with prior quarters and the conversion of surgeons at an increasingly faster pace, signaling stable market trends and competitive dynamics that favor our innovation and spine-only focused strategy."

In other words, NuVasive may have come up a bit short of Wall Street's ever-changing consensus figures, but its long-term strategy remains firmly in place. This is a great reminder to long-term investors not to get worked up over the day-to-day movements in stock prices, or the seemingly large move lower in NuVasive for what looks to be a minor and temporary concern.

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Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.

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