Treace Medical Concepts stock plunges on lower forecast

Bunion surgical products company cites competitive pressures.

  • By Mark Basch
  • | 10:31 a.m. May 16, 2024
  • | 4 Free Articles Remaining!
Treace Medical Concepts Inc. CEO John Treace’s company developed the Lapiplasty procedecure to correct foot problems called bunions.
Treace Medical Concepts Inc. CEO John Treace’s company developed the Lapiplasty procedecure to correct foot problems called bunions.
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Treace Medical Concepts Inc. reported higher first-quarter revenue but lowered its growth forecast for the rest of the year, citing competitive pressure in its business.

As a result, Treace’s stock plunged to its lowest levels since its April 2021 initial public offering.

Ponte Vedra-based Treace, which offers surgical products to treat bunions and other foot issues, said revenue rose 21% in the first quarter to $51.1 million.

However, the company also said it expects full year revenue of $201 million to $211 million, down from its previous forecast of $220 million to $225 million.

In a May 7 conference call with analysts, CEO John Treace said more surgeons are turning to a bunion treatment procedure called MIS osteotomy, and they are also using “knockoffs” of his company’s procedure called Lapiplasty.

“Both of these dynamics are creating incremental headwinds to our Lapiplasty growth,” he said.

Osteotomy has been the most common surgical procedure for bunions and Treace introduced Lapiplasty as an alternative which it says produces superior results.

However, new minimally invasive osteotomy procedures are now being favored by some surgeons, and Treace said it plans to introduce two new MIS osteotomy procedures of its own to give surgeons more options.

At least four analysts downgraded their ratings on Treace’s stock following the quarterly report.

“While the company should be able to more effectively compete once its MIS osteotomy products are on the market, it remains to be determined how well Treace will be able to win back share from its larger orthopedics peers,” J.P. Morgan analyst Robbie Marcus said in a research note as he downgraded the stock from “overweight” to “neutral.”

BTIG analyst Ryan Zimmerman, who downgraded the stock from “buy” to “neutral,” expressed concern about Treace’s introduction of osteotomy products in his note.

“Treace has built a strategy around Lapiplasty and shifting demand to Lapiplasty to treat bunions as the best clinical solution. In our view, offering osteotomy products combined with a significant guidance reduction ‘flies in the face’ of Treace’s core strategy,” Zimmerman said.

“When we spoke with management on this topic, they acknowledged how that looks but noted that osteotomy products were always part of the plan (and under a different set of circumstances we could see how they may fit the portfolio) but here it’s a hard pill to swallow,” he said.

Treace’s stock fell as much as $7.20 to a record low of $3.92 on May 8 after its report.

The stock was priced at $17 in its April 2021 IPO and traded as high as $37.17 in June 2021.

Treace reported a first-quarter net loss of $18.7 million and the company is projected to continue losing money for at least the next two years.

“With the slower revenue growth, it’s clear to us that Treace’s pathway to profitability will likely be meaningfully extended,” Zimmerman said.

New generation leading FRP Holdings

FRP Holdings Inc. announced a new generation of leadership May 8, with the sons of former CEO John Baker II and Chief Operating Officer David deVilliers Jr. assuming those roles.

David deVilliers III

John Baker III, who had been chief financial officer, was promoted to chief executive officer and David deVilliers III, who had been executive vice president, is now COO.

FRP Holdings is a Jacksonville-based real estate development company that was spun out of Florida Rock Industries Inc., the longtime Jacksonville-based construction materials firm that was run by the Baker family.

Vulcan Materials Co. acquired Florida Rock in 2007.

John Baker II remains chairman of the board at FRP and David deVilliers Jr. remains president and vice chairman. FRP’s recent proxy statement said Baker is 75 years old and deVilliers is 72.

John Baker III

John Baker III is 39 and David deVilliers III is 46, it said.

FRP reported first-quarter earnings of $1.3 million, or 7 cents a share, more than doubling the previous year’s earnings of $565,000, or 3 cents a share.

The company has focused on developing properties in the Washington, D.C., area. After developing some mixed-used properties, the company is looking more to industrial projects.

“The returns are currently better than most multifamily projects, and are less capital intensive and less reliant on debt. Industrial development has always been our core competency and we are excited to flex that muscle in markets both familiar and new,” FRP said in a news release.

Fidelity earnings still impacted by high rates

Fidelity National Financial Inc. reported higher first-quarter earnings than last year but with high mortgage rates affecting its title insurance business, earnings remained well below 2022 levels.

Jacksonville-based Fidelity’s adjusted earnings of 76 cents a share were 20 cents higher than the first quarter of 2023, but far lower than earnings two years ago of $1.36.

Revenue in Fidelity’s core title insurance business rose 7% from last year to $1.7 billion, but the company took in $2.4 billion in title revenue in the first quarter of 2022.

“The timing for a potential rebound in the housing market is uncertain and largely dependent on lower mortgage rates. In the scenario where more inventory comes into the market and rates come down, we are well positioned to capture upside to last year’s performance,” CEO Mike Nolan said in a May 9 conference call.

Nolan also pushed back at recent criticism from the U.S. Consumer Financial Protection Bureau and other sources over title fees. The CFPB is investigating closing costs for homeowners, including title insurance, to determine if they are excessive.

Nolan said title insurance is important to protect consumers’ property ownership rights.

“We are the first line of defense in helping protect buyers and sellers from real estate and wire fraud,” he said.

FIS earnings rise 3% in first quarter

Fidelity National Information Services Inc., or FIS, reported first quarter adjusted earnings rose by 38 cents a share to $1.10, with adjusted revenue rising 3% to $2.39 billion.

Jacksonville-based FIS followed its earnings report with an Investor Day presentation May 7 at the New York Stock Exchange, where it highlighted expansion of its financial technology.

FIS has traditionally been a banking technology company but it introduced a new technology platform called Atelio that will allow companies from all industries to embed financial services into their products.

“We are unlocking our financial technology across the entire money life cycle to drive accelerating growth,” CEO Stephanie Ferris said in a news release.

FIS was spun off from Fidelity National Financial in 2006.

Acquisitions impact Cadre results

Cadre Holdings Inc. reported first-quarter sales rose 23% to $137.9 million, due in part to recent acquisitions.

However, earnings fell by a penny to 18 cents a share, which the company attributed to higher costs due to acquisitions and transaction expenses.

The Jacksonville-based company, which makes security products mainly for first responder markets, sees high demand for its products.

“We continue to see signs that the secular trends driving demand for our mission-critical life-saving products around the world are only growing stronger,” CEO Warren Kanders said in a May 7 conference call.

“Conflicts in Ukraine and the Middle East carry on with no end in sight, creating geopolitical uncertainty and underscoring the importance of robust defense budgets,” he said.

“In the U.S., while first responder recruiting has been slow, crime rates are a focus and we have seen increased levels of protest and civil unrest. Historically, our businesses have been resilient across economic, political, geopolitical and other cycles and we expect this will continue to be the case.” 

Progress on sale of RYAM Canadian assets moving slowly

Rayonier Advanced Materials Inc., or RYAM, reported a first-quarter net loss of $2 million May 7, with sales falling 17% to $388 million.

The cellulose specialties company in October put its paperboard and high-yield pulp assets at a Canadian plant up for sale as part of a turnaround plan. The company said the sale process is progressing but it’s been slower than anticipated.

Jacksonville-based RYAM also announced April 29 it was suspending operations at its high purity cellulose plant at the Canadian site to mitigate operating losses and improve cash flow.

The company said in a news release that the sale process of the paperboard and high-yield pulp assets and the decision to suspend other operations at the Canadian plant are separate.

However, “the Company believes the suspension will bring clarity to the asset sale diligence process by validating that these assets can be efficiently run separately,” it said.

Redwire revenue up in first quarter

Jacksonville-based space technology company Redwire Corp. reported first-quarter revenue jumped 52% to $87.8 million in the first quarter.

The company recorded a net loss of $8.1 million in the quarter, but Chief Financial Officer Jonathan Baliff said in a May 8 news release it achieved positive net cash flow from operations of $2.8 million.

“We expect continued momentum throughout the year with more than $600 million in organic bids already submitted in 2024, as we continue to scale and diversify our business on a proven path to profitability,” he said.

Redwire expects revenue of $300 million for all of 2024.

CSX adds former AT&T executive to its board

Anne Chow

CSX Corp. said May 8 it appointed former AT&T executive Anne Chow to its board of directors.

Chow spent 32 years at AT&T, including three years as CEO of AT&T Business, before retiring in 2022. She is now chief executive of The Rewired CEO, a Dallas-based consulting firm.

Jacksonville-based CSX said 11 other directors were reelected to the railroad company’s board at its May 8 annual shareholders meeting.



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