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Merit Medical (MMSI) Q2 Earnings Beat, FY22 View Revised

Merit Medical Systems, Inc. MMSI delivered adjusted earnings per share (EPS) of 73 cents in the second quarter of 2022, up by 17.7% year over year. The figure also surpassed the Zacks Consensus Estimate by 25.9%.

The adjustments include expenses related to amortization of intangibles, and corporate transformation and restructuring, among others.

GAAP EPS for the quarter was 27 cents a share, up by a stupendous 200% year over year.

Revenues in Detail

Merit Medical registered revenues of $294.9 million in the second quarter, up 5.2% year over year. The figure surpassed the Zacks Consensus Estimate by 4.9%.

Per management, the overall top line was driven by a 3.7% growth in U.S. sales and 7.2% growth in international sales. Strong segmental performances also contributed to the top line.

Constant exchange rate, organic revenues inched up 7.4% year over year on the back of 2.6% growth in the United States and 13.6% growth in international sales during the period.

Segmental Details

Merit Medical operates through two segments — Cardiovascular and Endoscopy.

The Cardiovascular unit reported second-quarter revenues of $286.7 million, up 5.3% year over year.

The Cardiovascular segment includes the following product categories: Peripheral Intervention, Cardiac Intervention, Custom Procedural Solutions and original equipment manufacturer (OEM).

Peripheral Intervention product line revenues were $110.9 million, up 5.1% year over year. Cardiac Intervention revenues rose 4.6% to $89.6 million. OEM revenues climbed 14.3% to $37 million, whereas Custom Procedural Solutions revenues climbed 0.9% to $49.1 million.

Endoscopy devices’ revenues totaled $8.3 million, up 3.4% year over year, driven primarily by strong demand for Merit Medical’s Elation esophageal balloon products.

Merit Medical Systems, Inc. Price, Consensus and EPS Surprise

Merit Medical Systems, Inc. Price, Consensus and EPS Surprise
Merit Medical Systems, Inc. Price, Consensus and EPS Surprise

Merit Medical Systems, Inc. price-consensus-eps-surprise-chart | Merit Medical Systems, Inc. Quote

Margins

In the quarter under review, Merit Medical’s gross profit rose 8.8% to $135.1 million. Gross margin expanded 151 basis points (bps) to 45.8%.

Selling, general & administrative expenses fell 6.6% to $85.5 million. Research and development expenses went up 4.9% year over year to $18.5 million. Adjusted operating expenses of $103.9 million decreased 4.8% year over year.

Adjusted operating profit totaled $31.1 million, reflecting a 107.7% surge from the prior-year quarter. Adjusted operating margin in the second quarter expanded by 520 bps to 10.5%.

Financial Position

Merit Medical exited second-quarter 2022 with cash and cash equivalents of $63 million compared with $53.9 million at the end of first quarter. Total debt (including the current portion) at the end of second-quarter 2022 was $246 million compared with $252.5 million at the end of first quarter.

Cumulative net cash flow from operating activities at the end of second-quarter 2022 was $50.8 million compared with $76.4 million a year ago.

2022 Guidance

Merit Medical has revised its 2022 outlook.

Net revenues for 2022 are now projected between $1.123 billion and $1.135 billion, reflecting an increase of approximately 5-6% over the comparable reported figures of 2021. The company’s earlier projection for full year net revenues was $1.117-$1.140 billion, reflecting an increase of approximately 4-6% over the comparable reported figures of 2021. The Zacks Consensus Estimate for the same is pegged at $1.13 billion.

Net revenues from the cardiovascular segment are now expected in the range of $1.093-$1.102 billion, representing an increase of approximately 5-6% over the comparable reported figures of 2021. Merit Medical’s previous projections were net revenues of $1.083-$1.106 billion, representing an increase of approximately 4-6% over the comparable reported figures of 2021.

Endoscopy segment’s net revenues are now projected to be between $30 million and $34 million, representing a range of a 5% decline to an 8% increase over the comparable reported figures of 2021. The earlier expected range was $33.5-$34.1 million, reflecting an uptick of around 6-8% over the comparable reported figures of 2021.

Adjusted EPS for 2022 are now projected to be $2.42-$2.52 compared with the previous expectation of $2.41-$2.56. The Zacks Consensus Estimate for the same stands at $2.50.

Our Take

Merit Medical exited the second quarter of 2022 with better-than-expected results. The year-over-year uptick in the top line and bottom line is impressive. The company saw revenue growth in both Cardiovascular and Endoscopy segments, and across all product categories within its Cardiovascular unit. Solid product sales are also promising. Robust performances in both the United States and outside are impressive. Strong execution and improving customer demand trends pushed up the overall top line, which is encouraging.

The company stands to benefit from the execution of its global growth and profitability plan. A robust product line raises investors’ optimism about the stock. Expansion of both margins also bodes well.

However, the current challenging global macro environment raises our apprehension. Stiff competition and higher consolidation in the healthcare industry are dampeners.

Zacks Rank and Key Picks

Merit Medical currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated DGX, Medpace Holdings, Inc. MEDP and Neogen Corporation NEOG.

Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics has an earnings yield of 7.2% compared with the industry’s 3.2%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.

Medpace Holdings, having a Zacks Rank #2, reported second-quarter 2022 EPS of $1.46, which beat the Zacks Consensus Estimate by 8.9%. Revenues of $351.2 million outpaced the consensus mark by 1.3%.

Medpace Holdings has an estimated growth rate of 27.7% for full-year 2022. MEDP’s earnings surpassed estimates in the trailing four quarters, the average being 17.3%.

Neogen reported fourth-quarter fiscal 2022 EPS of 18 cents, which surpassed the Zacks Consensus Estimate by 12.5%. Fiscal fourth-quarter revenues of $140.1 million outpaced the Zacks Consensus Estimate by 1.3%. It currently has a Zacks Rank #2.

Neogen has an estimated growth rate of 1.6% for fiscal 2023. NEOG’s earnings surpassed estimates in two of the trailing four quarters, lagged the same in one and broke even in the other, the average being 1.5%.


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