Merit Medical Systems, Inc. MMSI is well poised for growth on the back of solid segmental performances, robust product pipeline, strategic expansion and strong prospects in the HeRO product line.
The stock currently carries a Zacks Rank #2 (Buy).
What’s Favoring the Stock?
Merit Medical remains focused on bolstering its product pipeline which aids it in expanding customer base and enhance overall performance. The company remains optimistic about several new products that are in the pipeline and slated for introduction in the second quarter of 2019. These are expected to aid the company’s growth and margins.
Further, the company continues to reap benefits from its HeRO product line, which has been a key catalyst. Given the strong global prospects of hemodialysis solutions, the HeRO product line is likely to provide Merit Medical with a competitive edge in the MedTech markets. Per a report by MarketWatch, the global hemodialysis and peritoneal dialysis market is estimated to reach a worth of $84 billion by 2024 at a CAGR of 6%.
The company continues to leverage from bolt-on buyouts to drive inorganic growth. The company remains optimistic about Merit Medical’s Becton Dickinson deal, acquisitions of Cianna Medical and Vascular Insights, and execution of the global growth and profitability plan.
Additionally, the company’s continued focus on Research and Development (R&D) helps in instilling investor confidence. The company’s strong commitment to innovation led to the introduction of several new products, improvements in the existing products and expansion of product lines, and enhancements and new equipment in the R&D facilities.
Notably, solid 2019 outlook buoys optimism for the stock. The company expects 2019 revenues in the band of $1.01-$1.03 billion. Adjusted EPS are expected between $1.97 and $2.08. The company anticipates adjusted gross margins within 50.6-51.3%.
Merit Medical expects core revenue growth of 8-10%. The company also expects an addition of 100-150 basis points to gross margin, and net income improvement of approximately 14-19%.
Shares of Merit Medical have declined 5.5%, against the industry’s growth of 13.3% on a year-to-date basis. The stock also compares unfavorably with the S&P 500 Index’s rally of 12%. We expect the aforementioned factors might aid the stock in rebounding in the near term.
Which Way are Estimates Headed?
For 2019, the Zacks Consensus Estimate for revenues is pegged at $1.02 billion, indicating an improvement of 15.8% from the year-ago period. The same for earnings stands at $2.02, suggesting growth of 19.5% from the year-ago reported figure.
Other Key Picks
Some other top-ranked stocks from the broader medical space are Cardiovascular Systems, Inc. CSII, Quidel Corporation QDEL and Heamonetics Corporation HAE, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cardiovascular Systems has an earnings growth rate of 33.3% for the fourth quarter of fiscal 2019.
Quidel Corporation has a long-term earnings growth rate of 25%.
Heamonetics has a long-term earnings growth rate of 13.5%.
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