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Here's Why You Should Invest in Surmodics (SRDX) Stock Now

Zacks Equity Research

Surmodics, Inc. SRDX is well poised for growth backed by consistent growth In Vitro Diagnostics (IVD) unit and persistent efforts to bolster research and development (R&D) functionalities.

The stock currently sports a Zacks Rank #1 (Strong Buy).

Price Performance

Shares of Surmodics have gained 4.6%, outperforming the industry’s growth of 1.8% on a quarter-to-date basis. Notably, the S&P 500 Index’s declined 2.7% in the same timeframe.

Factors to Bolster Surmodics

Surmodics’ IVD unit continues to drive the company’s performance as traditionally the segment has been a leader in developing an ELISA/EIA, immunoblot/western blot, line assay or microarray.

Further, the company continues to gain from core Medical Devices unit, which witnessed significant contribution from its SurVeil agreement with Abbott. In fact, the company’s fiscal third-quarter revenues of $24.3 million included $2 million contribution from the SurVeil agreement with Abbott. Management anticipates this segment to witness double-digit revenue growth in fiscal 2019.

Surmodics’ continued efforts to bolster R&D stature have been a key catalyst. The company’s whole product solutions pipeline and sirolimus-based below-the-knee DCB program deserve a mention in this regard. Moreover, it has also been working through the preclinical studies for the data package that will be utilized to determine the readiness for first in-human clinical trial. The company is expected to make continued progress throughout the remainder of fiscal 2019.

Given the company’s strength in the R&D prospects, Surmodics has long-term goals of generating double-digit top-line growth by the end of calendar 2019 and generating EBITDA margins at or above 30% by fiscal 2021.

Moreover, acquisitions made by the company in the last few years have not only diversified its revenue base but also expanded customer base.

Raised outlook for 2019 instills optimism in the stock. Notably, the company expects revenues to range between $92 million and $94 million (up from the previously guided range of $88.5-$91.5 million). Adjusted EPS is now projected between 41 cents and 49 cents compared with the previous projection of 26-36 cents.

Which Way Are Estimates Headed?

For 2019, the Zacks Consensus Estimate for revenues is pegged at $92.8 million, indicating an improvement of 14.1% from the year-ago period. For adjusted earnings per share, the same stands at 42 cents, suggesting a decline of 14.3% from the year-ago reported figure.

Other Key Picks

Some other top-ranked stocks from the broader medical space are Baxter International Inc. BAX, Amedisys, Inc. AMED and CONMED Corporation CNMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Baxter has a long-term earnings growth rate of 12.8%.

Amedisys has a long-term earnings growth rate of 16.3%.

CONMED has a long-term earnings growth rate 14.9%.

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