Merit Medical Systems, Inc. MMSI is well poised for growth in the coming quarters, backed by its potential in the Peripheral Intervention arm. A solid first-quarter 2021 performance, along with strong international foothold, is expected to contribute further. However, stiff competition and foreign exchange headwinds persist.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 38.4% compared with 32.1% growth of the industry and 42.5% rise of the S&P 500 composite.
The renowned medical devices provider has a market capitalization of $3.52 billion. The company projects 12.9% growth for the next five years and expects to maintain its strong performance. Further, it has delivered an earnings surprise of 280.13% for the past four quarters, on average.
Let’s delve deeper.
Strong Q1 Results: Merit Medical’s robust first-quarter 2021 results buoy optimism. The company saw overall revenue growth within its Cardiovascular unit. The CE mark for the Merit WRAPSODY Endoprosthesis Stent System and its commercialization in the European Union continue to buoy optimism on the stock. The recent enrollment of the first patients in its Wrapsody ArterioVenous Access Efficacy Pivotal Study (the WAVE Study) of the WRAPSODY Endovascular Stent Graft is encouraging as well.
Expansion in both margins bodes well. Further, the company stands to benefit from the execution of its global growth and profitability plan. A robust product pipeline is encouraging as well. The company witnessed robust demand for several of its critical care products despite pandemic-led business disruptions.
Potential in Peripheral Intervention Unit: Merit Medical’s Peripheral Intervention arm buoys our optimism. These products have been contributing enormously to the company’s top-line growth. During the first quarter of 2021, the company’s U.S. sales growth was driven by low single-digit increases in sales of both peripheral intervention and cardiac invention products. Further, international sales growth during the quarter was driven by high single-digit growth in sales of Merit Medical’s peripheral intervention products.
International Exposure: We are upbeat about Merit Medical’s current geographical spread, including territories in the EMEA and APAC regions. During the first quarter of 2021, the company’s sales growth in the APAC region was driven by strong demand in China. Also, the reported sales growth in the APAC region included the sales related to the company’s ITL procedure pack business in Australia, which was closed in December 2020. In the EMEA region, the demand for critical care products remained strong throughout Europe in the first quarter despite continued pandemic-led challenges.
Foreign Exchange Woes: Merit Medical, of late, has been expanding its operations outside the United States. This has led to the company becoming increasingly subject to market risk relating to foreign currency, which could have a negative impact on its margins and financial results.
Competition: Merit Medical operates in markets in which its products are highly competitive. It faces competition from many companies which possess a greater market presence and more resources. These may enable the competitors to market competing products more effectively or at reduced prices, in order to gain market share.
Merit Medical is witnessing a positive estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 3.8% north to $1.93.
The Zacks Consensus Estimate for the company’s second-quarter 2021 revenues is pegged at $251.4 million, suggesting a 15.1% rise from the year-ago quarter’s reported number.
Some better-ranked stocks from the broader medical space are Illumina, Inc. ILMN, DaVita Inc. DVA and Amedisys, Inc. AMED, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Illumina’s long-term earnings growth rate is estimated at 7%.
DaVita’s long-term earnings growth rate is estimated at 14.4%.
Amedisys’ long-term earnings growth rate is estimated at 12%.
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