Orthofix stock holds Neutral after Q4 earnings beat

On Tuesday, BTIG maintained a Neutral rating on Orthofix International (NASDAQ:OFIX) after the medical device company posted its fourth-quarter earnings. Orthofix reported revenue of $215.7 million, a 7.6% increase year-over-year and a 7.8% rise on a constant currency basis, surpassing the consensus estimate of $212.7 million. Adjusted EBITDA for the quarter also exceeded expectations, coming in at $23.9 million compared to the Street’s estimate of $22.6 million. The growth was primarily driven by its Global Orthopedics segment, which saw an 18.1% year-over-year increase on a constant currency basis, and by BioStim, with an 8.6% rise. According to InvestingPro data, the company maintains strong liquidity with a current ratio of 2.39, though two analysts have recently revised their earnings expectations downward for the upcoming period.

For the fiscal year 2025, Orthofix provided revenue guidance in the range of $818 million to $826 million, falling short of the Street’s projection of $847 million. This forecast accounts for the discontinuation of the M6-C and M6-L product lines, which generated approximately $23.4 million in revenue in FY24 and were expected to contribute around $25 million in FY25 based on Street estimates. As a consequence of phasing out these products, Orthofix has adjusted its long-range revenue growth targets to 6.5%-7.5%, a slight dip from the previous 6%-7% target. InvestingPro analysis indicates the company may face profitability challenges, with analysts not expecting positive earnings this year despite maintaining a robust gross profit margin of nearly 71%.

Despite the phase-out, the company anticipates adjusted EBITDA for FY25 to be between $82 million and $86 million, as management shifts its focus towards profitable growth. BTIG acknowledged the progress Orthofix has made throughout FY24 but cautioned that first-quarter sales for FY25 might be weak, as suggested by the provided guidance. This, combined with the expectation of a more gradual ramp-up in product contributions in the second half of the year, could lead to a more moderate growth trajectory.

Orthofix’s shares are currently trading at relatively low valuations, approximately 1.1 times next twelve months (NTM) enterprise value to sales and around 10 times enterprise value to EBITDA. However, given the moderated growth outlook and the tougher comparisons expected in FY25, BTIG believes the Neutral rating remains appropriate. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this and 1,400+ other US equities.

In other recent news, Orthofix International has been the subject of a new analysis by Canaccord Genuity, which initiated coverage of the company with a Buy rating and set a price target of $24.00. Canaccord Genuity’s analysis follows Orthofix’s merger with SeaSpine over two years ago and the establishment of a new management team in early 2024. The firm highlights the successful integration of the companies’ offerings and personnel, which is expected to support Orthofix’s long-range plans and unified strategy. The research firm is optimistic about Orthofix’s potential, noting its unique and comprehensive product portfolio. Canaccord Genuity anticipates that Orthofix will continue to innovate and leverage its full range of products to gain commercial traction. The firm also points out that Orthofix’s strategic focus is on achieving above-market growth, generating cash, and expanding margins, which could lead to profitable growth. Additionally, Canaccord Genuity notes that Orthofix is currently trading below the average of its small-cap and spine company peers, suggesting the stock’s current price is attractive.

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