Technology

Merit Medical (MMSI) Up 5.5% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Merit Medical (MMSI). Shares have added about 5.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Merit Medical due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Merit Medical Q4 Earnings & Revenues Surpass Estimates

Merit Medical reported fourth-quarter 2018 adjusted earnings per share (EPS) of 48 cents, which exceeded the Zacks Consensus Estimate of 45 cents. The bottom line also improved 45.5% from the year-ago quarter’s tally.

This Utah-based provider of peripheral and cardiac intervention products reported worldwide revenues of $233.2 million, up 22.2% from the year-ago quarter’s tally. On a comparable, constant-currency basis, the metric increased 13.1% year over year. Revenues surpassed the Zacks Consensus Estimate of $230.1 million.

2018 at a Glance

Merit Medical reported 2018 worldwide revenues of $882.8 million, up 21.3% on a year-over-year basis.

Notably, the company generates revenues through two segments — the Cardiovascular unit and the Endoscopy devices segment.

The Cardiovascular segment recorded revenues of $849.5 million (96.2% of net revenues).

The Endoscopy devices segment’s revenues amounted to $33.3 million (3.8% of net revenues).

Segmental Analysis

Cardiovascular

The Cardiovascular unit recorded fourth-quarter revenues of $225.1 million, up 22.7% year over year. The upside can be attributed to a 40.5% year-over-year increase in the segment’s Stand-alone devices to $101.2 million. Also, revenues from Catheters increased 24.9% to $41.7 million. Inflation devices revenues grew 11% year over year to $22.8 million. The same at the CRM/EP unit rose 27.5% to $12.7 million.

On the flip side, revenues from Custom kits and procedure trays unit, under the Cardiovascular segment, declined 1.7%to $34.4 million. Also, embolization devices’ revenues decreased 2.1% to $12.3 million.

Endoscopy Devices

Revenues from the Endoscopy devices totaled $8.2 million, up 9.9% year over year.

Margins

In the quarter under review, gross profit totaled $104.7 million, up 22.2% on a year-over-year basis. Gross margin came in at 44.9% of net revenues, almost flat year over year. Adjusted gross margins expanded 150 basis points (bps) on a year-over-year basis to 49.4% of net revenues.

Merit Medical registered selling, general and administrative expenses of $75.6 million, up 27.7% year over year.

Meanwhile, research and development expenses summed $15.4 million, up 20.8% year over year.

Adjusted operating income in the quarter totaled $13.7 million. Adjusted operating margin was 5.9% of net revenues, down 130 basis points (bps) year over year.

2019 Guidance

Merit Medical issued guidance for 2019.

The company expects full-year revenues in the band of $1.01-$1.03 billion.The Zacks Consensus Estimate for the same is pegged at $1.01 billion, in line with the lower end of the guided range.

Adjusted EPS are expected between $1.97 and $2.08. The Zacks Consensus Estimate for the same is pinned at $1.97, in line with the lower end of the projected range.

The company expects adjusted gross margins within 50.6-51.3%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -7.26% due to these changes.

VGM Scores

Currently, Merit Medical has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Merit Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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