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Globus buy, $31 target reiterated by Aegis Cap after miss

February 28, 2017

Aegis Capital reiterated a Buy rating and $31.00 price target on Globus Medical (NYSE: GMED) following the company’s 4Q earnings report. Sales grew 6.3% to $151.6 million, driven by Alphatec international sales and recovery in the US market. Non-GAAP EPS of $0.31 was 2 cents short of consensus estimates. Management reiterated FY2017 guidance of $625 million (including a $5 million FX headwind) and non-GAAP EPS of $1.27.

Analyst Jason Wittes commented, “GMED reported 4Q16 non-GAAP EPS and revenues of $0.31 and $151.6 million (6.3%/6.5% cc), respectively, with EPS 2 cents short of our and consensus estimates and revenues in line with preliminary reported revenues. Gross margins for the quarter were 74.3%, down from 75.4% in 4Q15 due to one-time accounting adjustments and acquisition-related costs. Despite increasing investments, management maintained strong non-GAAP adjusted EBITDA margins of 37.7% though non-GAAP EPS fell short by 2 cents. During the call management emphasized that sales force issues are now behind them and, most importantly, that they expect to see a return to positive organic US growth in 1Q17. Management believes that this is the inflection point and is re-affirming FY2017 guidance of $625 million in revenues and $1.27 in EPS – roughly 6.4% organic top-line growth. We believe US approval of its Excelsius GPS robot (expected by mid-year) and build out of its trauma business will provide upside to the business, where management is assuming a modest $10 million in emerging technologies contribution in 2017. We re-iterate our Buy rating and $31 TP.”

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