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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 In Vitro Diagnostics (IVD) unit’s consistent growth 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 5.6%, against the industry’s decline of 0.9% in the last three months. Notably, the S&P 500 Index declined 1.6% in the same timeframe.

Factors to Bolster Surmodics

The IVD unit has been pioneering the development of ELISA/EIA, immunoblot/western blot, line assay or microarray, which in turn drives the company.

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 same. Management anticipates this segment to witness double-digit revenue growth in fiscal 2019.

Surmodics’ persistent 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 achieving 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 revenues 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 $97.8 million. For adjusted earnings per share, the same stands at 69 cents, suggesting an improvement of 40.8% from the year-ago reported figure.

Other Key Picks

Some other top-ranked stocks from the broader medical space are Nissan Chemical Corporation NNCHY, DENTSPLY SIRONA Inc. XRAY and McKesson Corporation MCK, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nissan Chemical has a long-term earnings growth rate of 10%.

DENTSPLY SIRONA has a long-term earnings growth rate of 11.6%.

McKesson has a long-term earnings growth rate of 6.9%.

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