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Earnings Beat at SurModics - Analyst Blog

Posted
11/8/2012 8:20:00 AM
By: Zacks.com
Referenced Stocks:JNJ;SRDX

SurModics Inc. 's ( SRDX ) fourth quarter fiscal 2012 earnings (excluding special items) of 19 cents per share beat the Zacks Consensus Estimate by 2 cents and the year ago earnings by 10 cents per share. The impressive performance in the final quarter of fiscal 2012 (ended September 30, 2012) was primarily attributable to higher revenues.

Quarter in Details

Adjusted revenues climbed 12.3% year over year to $13.8 million in the reported quarter. Revenues narrowly missed the Zacks Consensus Estimate of $14 million. Revenues at SurModics surged due to increased sales of vitro diagnostics offerings and hydrophilic coatings. However, revenues on a reported basis stood at $13.8 million, down 0.7%.

During the final quarter of fiscal 2012, SurModics generated negligible royalty revenues from Johnson & Johnson ( JNJ ) pertaining to Cypher and Cypher Select Plus drug eluting stents. Johnson & Johnson stopped manufacturing these products from the end of calendar year 2011. Royalty revenues pertaining to these products were $1.6 million a year ago.

For the reported quarter, royalties and license fees accounted for approximately 53.6% of the total adjusted revenues with product sales and research & development accounting for 38.4% and 8%, respectively.

Following the November 2011 sale of the assets of its Pharmaceuticals division to Germany's Evonik Industries AG, SurModics operates through two business units: Medical Devices and In Vitro Diagnostics.

SurModics' reported revenues from the Medical Devices segment were approximately $10 million, down 2.4%. Bulk of the segmental revenues came from the sales of hydrophilic coatings, which climbed 13%. Reported revenues from the In Vitro Diagnostics unit increased 5% to $3.8 million in the final quarter of fiscal 2012.

The final quarter of fiscal 2012 witnessed SurModics returning $55 million cash to its shareholders through a share buyback program. We believe that the buyback program highlights the company's commitment to create value for shareholders.

Annual results

For fiscal 2012 SurModics earned 61 cents per share on an adjusted basis, beating the Zacks Consensus Estimate by a penny. The company earned 38 cents per share in fiscal 2011.

Adjusted revenues for fiscal 2012 climbed approximately 12% year over year to $51.5 million, narrowly missing the Zacks Consensus Estimate of $52 million.

Fiscal 2013 Projection

Apart from announcing its financial results, SurModics also provided an outlook for fiscal 2013. Surmodics expects fiscal 2013 revenues in the range of $55-$58 million, up 6%-12% year over year.  Moreover, fiscal 2013 earnings are expected in the range of 75 cents-87 cents per share. The Zacks Consensus Estimate currently hints at earnings of 81 cents on revenues of $57 million for fiscal 2013.

Our Recommendation

We currently have an Outperform recommendation on SurModics. The stock carries a Zacks #1 Rank (short-term 'Strong Buy' rating).



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