3 Reasons to Add Merit Medical (MMSI) Stock to Your Portfolio
Merit Medical Systems, Inc. MMSI has been gaining from its strong product portfolio. The optimism led by solid second-quarter 2023 performance and international exposure are expected to contribute further. However, headwinds due to higher consolidation in the healthcare industry and stiff competition persist.
Over the past year, this Zacks Rank #2 (Buy) stock has gained 13.6% compared with a 47.7% rise of the industry and 14.3% growth of the S&P 500.
The renowned medical device provider has a market capitalization of $3.85 billion. The company projects 11.5% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 15.8% for the past four quarters, on average.
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Let’s delve deeper.
Strong Product Portfolio: Merit Medical has continued to gain significant momentum on the back of new products. The company is upbeat about the product pipeline, including radio and electrophysiology products, raising investors’ optimism. It has several electrophysiology products that are either on track for release or in several other stages of development.
In September, Merit Medical announced the U.S. commercial release of its Aspira Bottle.
International Exposure: We are optimistic about Merit Medical’s worldwide product distribution network, which includes territories in Europe, the Middle East, Africa (EMEA) and Asia, among others. On the second quarter of 2023 earnings call, Merit Medical confirmed that growth in U.S. and international sales drove its overall top line.
Per management, Asia Pacific (APAC) was the primary driver of better-than-expected results, although both the EMEA and Rest of World regions were at the upper end of Merit Medical’s growth expectations in the second quarter. APAC growth was driven by sales in China, which increased year over year as the improving trends in March continued into the second quarter.
Strong Q2 Results: Merit Medical’s robust second-quarter 2023 results buoy optimism. The company witnessed a year-over-year uptick in the top and bottom lines. The company also saw revenue growth in both its segments and across all the product categories within its Cardiovascular unit. Robust performances in the United States and outside were also seen. The expansion of gross margin bodes well for the stock.
Downsides
Higher Consolidation in the Healthcare Industry: Healthcare costs have risen significantly over the past decade. Thus, to provide healthcare solutions at a cheaper rate and eradicate competition, large-cap MedTech behemoths have started consolidating with mid-cap and small-cap companies. This enables the availability of healthcare products at cheap prices in the market.
Per management, such trends compel Merit Medical’s customers to ask for price concessions in its products, which act against the ongoing business strategies. This may also exert a solid downward pressure on the prices of Merit Medical’s products and reduce the customer base.
Stiff Competition: Merit Medical operates in highly competitive markets, where it faces competition from many companies with greater resources. The company competes globally in several market areas, including radiology and interventional cardiology. Such resources and market presence may enable the competitors to market competing products more efficiently or at reduced prices to gain market share.
Estimate Trend
Merit Medical is witnessing a negative estimate revision trend for 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved a penny south to $2.88.
The Zacks Consensus Estimate for the company’s third-quarter 2023 revenues is pegged at $306.3 million, suggesting a 6.6% rise from the year-ago quarter’s reported number.
Other Key Picks
A few other top-ranked stocks in the broader medical space are DaVita Inc. DVA, McKesson Corporation MCK and Integer Holdings Corporation ITGR.
DaVita, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 12.7%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed once, with an average surprise of 21.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita has gained 4.9% against the industry’s 6.6% decline over the past year.
McKesson, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 10.7%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed once, with an average of 8.1%.
McKesson has gained 27.3% compared with the industry’s 47.7% rise over the past year.
Integer Holdings, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Integer Holdings has gained 44.1% against the industry’s 2.4% decline over the past year.
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DaVita Inc. (DVA) : Free Stock Analysis Report
McKesson Corporation (MCK) : Free Stock Analysis Report
Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report
Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
