BTIG Downgrades Orthofix Medical On M6 Uncertainty

Orthofix Medical Inc OFIX reported quarterly results Monday that were broadly in-line with expectations while guiding to higher spending and linear revenue growth.

Investors can look past the guidance and the announcement of CEO Brad Mason's retirement during a turbulent time, but will want more clarity around growth drivers — especially the commercialization of the MC-6 artificial cervical disc, according to BTIG.

The Analyst

BTIG’s Ryan Zimmerman downgrade Orthofix Medical from Buy to Neutral.

The Thesis

Orthofix Medical has indicated modest revenue growth through FY19 and double-digit organic growth in FY20. Uncertainty surrounds how the company will achieve this, Zimmerman said in a Tuesday note. 

Although M6-C could result in accelerating growth for the company, the projection of revenue growing by around $48 million in FY20 appears ambitious, the analyst said. 

For the company to reach this target, sales of M6-C would need to grow significantly from FY19 levels, along with contributions from the rest of the business, which is currently growing in the low single digits, he said. 

Orthofix Medical’s shares could remain rangebound until here is greater clarity around growth drivers, Zimmerman said, adding that shares could “settle several percent lower." 

Price Action

Orthofix Medical shares were down 10.5 percent at $60.60 at the time of publication Tuesday. 

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