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Why Is SurModics (SRDX) Up 19.9% Since Last Earnings Report?

A month has gone by since the last earnings report for SurModics (SRDX). Shares have added about 19.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is SurModics 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.

Surmodics reported adjusted earnings of 27 cents per share in third-quarter fiscal 2018, up 200% year over year. The Zacks Consensus Estimate was pegged at a loss of 8 cents.

Revenues in the quarter increased 24.9% to $22.2 million, beating the Zacks Consensus Estimate of $20 million. The figure included $1.7 million of revenues from the company's SurVeil agreement with Abbott Labpratories.

Q3 Details

Notably, Product sales in the quarter were $10.5 million, up 25.8% year over year.

Royalty and license fee revenues totaled $9.6 million, up 32.5% from the year-ago quarter's tally. The uptick in royalty and license fee revenues indicate Surmodics' strength in the hydrophilic coatings royalties.

Research, development and other revenues were $2.2 million, down 2.9% year over year.

Segmental Analysis

Surmodics reports revenues under two segments - Medical Device and In Vitro Diagnostics (IVD).

Medical Device

In the reported quarter, sales rallied 30.7% to $16.7 million. The medical device business unit reported $6.2-million operating loss in the quarter under review. Notably, the company delivered operating income of $1.4 million in the prior-year quarter

Per management, the medical device operating results were impacted by the $7.9-million IP R&D charge associated with the acquisition of the Embolitech thrombectomy technology and also $1.5 million of increased R&D expenditure.

IVD

In the quarter under review, sales increased 10.3% to $5.5 million. The upside came on the back of strong growth and stabilization across microarray and antigen product sales.

Operating income in the segment was $2.2 million in the reported quarter, marginally down from the year-ago quarter's level.

Operating Details

Surmodics registered Product costs of $4.1 million in the quarter, up 40.8% year over year.

The company had Research and development costs of $9.8 million, up 23.4% year over year.

Selling, general and administrative expenditures were almost $6 million, up 14.2% year over year.

Total operating costs and expenses in the quarter were $28.5 million, up 77.5% year over year.

Guidance

Surmodics raised guidance for fiscal 2018.

Surmodics expects fiscal 2018 revenues in the range of $79-$81 million, up from the previous band of $75-$79 million. The Zacks Consensus Estimate is currently pegged at $78.4 million, lower than the guidance.

The company expects fiscal 2018 earnings per share between 39-44 cents, compared with the previous estimate of negative 6 cents and 9 cents. The Zacks Consensus Estimate is currently pegged at a loss of 2 cents per share, significantly below the guidance.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 90.91% due to these changes.

VGM Scores

Currently, SurModics has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise SurModics has a Zacks Rank #1 (Strong Buy). We expect an above average 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.


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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