Nevro NVRO is well-poised for growth in the coming quarters, courtesy of its business expansion plans and restructuring activities. The optimism, led by a decent preliminary full-year 2024 results, is expected to contribute further. However, concerns regarding softness in the spinal cord stimulation (SCS) market and dependence on third-party payers persist.
This Zacks Rank #2 (Buy) company’s shares have lost 49.7% in the past six months against the industry’s 3.5% growth. The S&P 500 has increased 12.1% in the said time frame.
The renowned global medical device company has a market capitalization of $175.4 million. The company projects 9.9% growth over the next five years. Nevro’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 42.73%.
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Reasons Favoring NVRO’s Growth
Market Expansion Into SI Joint Fusion: Nevro's entry into the SI joint fusion market through its acquisition of Vyrsa Technologies in December 2023 marks a strategic move to diversify beyond its established SCS portfolio. The global SI Joint fusion market size was valued at $721.2 million in 2023 and is expected to witness a CAGR of 19.8% between 2024 and 2030.
By introducing a complementary product line aimed at treating chronic pain caused by the SI joint, a common source of lower back pain, Nevro seeks to address a significant gap in traditional pain management therapies and capture a share of the joint-specific pain market. This diversification strengthens Nevro’s foothold in the pain management space, driving sustainable growth, faster profitability, and value creation.
The addition of SI joint fusion products complements Nevro’s SCS offerings, as they address different types of chronic pain, localized SI joint pain and more widespread pain managed by SCS. Rather than cannibalizing its existing business, this move creates cross-selling opportunities, enhances patient adherence, and broadens its treatment options for chronic pain management. By catering to a wider patient base, Nevro positions itself to generate incremental revenues and solidify its market presence in chronic pain management while addressing an underserved segment.
Restructuring Activities in Place: In January 2024, Nevro initiated a restructuring plan to enhance operational efficiency and accelerate profitability, including a 5% workforce reduction and total restructuring charges of $10.8 million by Sept. 30, 2024. With most severance and termination benefits paid, the company expects $25 million in cost savings for 2024 and an annualized run rate exceeding $30 million.
The plan focuses on streamlining operations, optimizing costs, and shifting manufacturing to its Costa Rica facility to improve gross margins. Additionally, reallocating marketing resources and adjusting sales territories will enhance market penetration and support new product launches, such as HFX iQ with AdaptivAI, strengthening Nevro’s competitive position.
Optimistic Full-Year 2024 Preliminary Results: Per management, the full-year 2024 worldwide revenues are higher than the guidance provided in November 2024 primarily due to the impact of greater-than-anticipated spinal cord stimulation (SCS) device replacement procedures in the fourth quarter of 2024. The company reallocated investments to its direct-to-consumer (DTC) advertising efforts in the third quarter of 2024 and has continued to witness patient interest and response as a result. NVRO anticipates that the benefit from DTC advertising will ramp throughout 2025, with a more meaningful impact in the second half of the year.
During the fourth quarter of 2024, Nevro published data highlighting the significant advantages of its SI Joint Fusion System (Nevro1), improving surgical outcomes and bolstering its market position in spinal procedures. The company also received CE Mark Certification in Europe for its HFX iQ SCS system, integrating AI technology to enhance competitiveness and drive global market expansion. Additionally, new data demonstrated the long-term effectiveness of its High-Frequency SCS therapy in reducing chronic pain, reinforcing Nevro's clinical leadership in pain management and supporting the adoption of its innovative treatments.
Factors That May Offset the Gains for NVRO
Weakness in SCS Market: While the SCS market remains underpenetrated and full of opportunity, Nevro is facing softness in this space due to newer therapies emerging earlier in the care continuum, delaying patient adoption of SCS therapy. Increased competition, driven by product launches from larger competitors and the rise of alternatives like SI joint fusion, provides physicians with more options to address chronic pain, impacting Nevro’s operating room schedules and customer engagement.
Dependence on Third-Party Payors: Nevro’s success in marketing its products largely depends on whether U.S. and international government health administrative authorities, private health insurers, and other organizations adequately cover and reimburse customers for the cost of its products. Access to adequate coverage and reimbursement for SCS procedures using Senza by third-party payors is essential to customers' acceptance of Nevro’s products.
A significant number of negative coverage and reimbursement decisions by private insurers may impair or delay the company’s ability to grow revenues.
Estimate Trend
Nevro has been witnessing a positive estimate revision trend for 2025. In the past 90 days, the Zacks Consensus Estimate for its loss per share has contracted 20 cents to $2.51.
The Zacks Consensus Estimate for the company’s fourth-quarter 2024 revenues is pegged at $105.7 million, indicating a 9.1% decline from the year-ago quarter’s reported number.
Other Key Picks
Some other top-ranked stocks in the broader medical space are ResMed RMD, Masimo MASI and Abbott Laboratories ABT.
ResMed, carrying a Zacks Rank #2 at present, has an estimated earnings per share growth rate of 21.1% for 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ResMed’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 6.41%. Its shares have risen 31.6% against the industry’s 12.8% decline in the past year.
Masimo, carrying a Zacks Rank #2 at present, has an estimated growth rate of 11.8% for 2025. MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Its shares have risen 51.4% compared with the industry’s 6.8% growth in the past year.
Abbott, carrying a Zacks Rank of #2 at present, has an estimated earnings growth rate of 10% for 2025. It delivered a trailing four-quarter average earnings surprise of 1.64%. ABT’s shares have risen 9.5% in the past six months compared with the industry’s 9.4% growth.
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