Rising earnings estimates on the back of solid second quarter
results have helped
Merit Medical Systems, Inc.
) achieve a Zacks #1 Rank (Strong Buy) on September 27, 2012.
Moreover, this medical devices company has delivered positive
earnings surprises in two of the last three quarters with an
average beat of 8.25%.
With a six month return of 21.4% and a track record of posting
in-line or higher quarterly earnings, this stock offers an
attractive investment opportunity.
The Rank Driver
Record second quarter performance, better-than-expected
earnings, expanding portfolio and international operations - are
the primary rank drivers for this stock.
Merit reported its second quarter results on July 26 with
earnings per share of 21 cents, beating the Zacks Consensus
Estimate of 18 cents by 16.67%. The second quarter earnings were
in-line with the year-ago earnings due to the 13% increase in the
outstanding shares resulting from the company's public offering in
Total revenues increased 10% year over year to $100.5 million
from $91.2 million in the year-ago quarter and surpassed the Zacks
Consensus Estimate by 0.95%. Growth was led by higher sales across
all the operating platforms especially in the international
On a year-over-year basis, Merit's BioSphere sales surged 21%,
Merit Endotek sales climbed 20%, catheter sales increased 20%,
revenues from stand-alone device edged up 10%, custom kit and tray
sales were up 4%, while inflation device sales rose 5%.
The top-line was backed by a 53.4% surge in Merit's operations
in China and contributions from international dealers, notably from
Central/South America. The company's growth was aided by its
international business and China emerged as a significant catalyst.
The company recorded a 40 basis point year-over-year expansion
in adjusted gross margin to 47.8% of sales in the quarter.
Recently, Merit obtained the FDA 510(k) clearance for its
Resolve Biliary Drainage Catheter, Concierge Guiding Catheter and
Merit Laureate(R) hydrophilic guide wire. There are expectations
that these new offerings will bolster the top-line.
Earnings Estimate Revision
The Zacks Consensus Estimate for 2012 increased 2.8% to 74 cents
over the last 90 days. For 2013, Zacks Consensus Estimate is 83
cents, reflecting a 12.01% increase over the year-ago earnings per
Merit currently trades at a forward P/E of 20.05x, a 7.16%
premium to the peer group average of 18.71x. Moreover, the
price-to-book ratio of 1.69x is at a 11.18% premium to the peer
group average of 1.52x. The company's strong fundamentals justify
the premium valuation of the stock.
Merit has a trailing 12-month ROE of 8.7% compared with the peer
group average of 5.2%
About the Company
South Jordan, Utah based-Merit Medical Sytem is a provider of
disposable medical devices for cardiology, radiology, endoscopy and
other interventional and diagnostic procedures. Founded in 1987,
the company offers employment to about 2,300 people worldwide. With
a market capitalization of roughly $628.56 million, Merit owns
manufacturing facilities across U.S., Europe and China. The company
expects to report its third quarter earnings result on October 22,
Other Zacks #1 Rank (Strong Buy) medical devices stocks include
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