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Merit Medical (MMSI) Q2 Earnings & Revenues Miss Estimates

Zacks Equity Research

Merit Medical Systems, Inc. MMSI reported second-quarter 2019 adjusted earnings per share (EPS) of 42 cents, lagging the Zacks Consensus Estimate of 50 cents by 16%. The bottom line also deteriorated 2.3% from the year-ago quarter.

This Utah-based provider of peripheral and cardiac intervention products reported worldwide revenues of $255.5 million, up 13.7% from the year-ago quarter. On a comparable constant-currency basis, the metric improved 9.6% year over year. However, the top line missed the Zacks Consensus Estimate of $258.9 million by 1.3%.

Segmental Analysis


The Cardiovascular unit reported second-quarter revenues of $246.7 million, up 14% year over year. The upside can be attributed to year-over-year increase of 11.9% in the segment’s Stand-alone devices to $103.5 million. Further, revenues from Catheters improved 15.2% to $45.3 million. The same for embolization devices rose 10.1% to $14 million.

Moreover, revenues at the CRM/EP unit increased 3% to $13.9 million. Further, revenues from Custom kits and procedure trays unit, under the Cardiovascular segment, rose 1% to $34.3 million. Inflation devices revenues remained flat on a year-over-year basis at $24.3 million.

Endoscopy Devices

Revenues from the Endoscopy devices totaled $8.9 million, up 5.3% year over year.

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


In the quarter under review, gross profit totaled $111.9 million, up 11.9% on a year-over-year basis. Gross margin came in at 43.8% of net revenues, down 70 bps year over year. Adjusted gross margins contracted 20 bps on a year-over-year basis to 48.7% of net revenues.

Merit Medical registered selling, general and administrative expenses totaled $79.9 million, up 15.7% year over year.

Meanwhile, research and development expenses amounted to $16.3 million, up 6.6% year over year.

Operating income in the quarter totaled $12.2 million, down 19.3% from the year-ago quarter. Operating margin was 4.8% of net revenues, contracting 190 bps on a year-over-year basis.

Financial Update

Cash and cash equivalents came in at $156.4 million, up 14% from the 2018-end level.

Total assets came in at $1.73 billion, up 7% from the year-end 2018.

Guidance Revised

For 2019, the company projects revenues in the range of $1-$1.03 billion (down from the previously guided range of $1.01-$1.03 billion).

Adjusted earnings per share is expected to range between $1.74 and $1.97 (down from the previously guided range of $1.97-$2.08).

Adjusted gross margin is estimated to range between 49.2% and 49.9% compared with prior guidance range of 50.6-51.3%.

Wrapping Up

Merit Medical exited the second quarter of 2019 on a weak note. Nonetheless, management remains optimistic about Merit Medical’s Becton Dickinson deal that is set for completion at the end of this year. The acquisitions of Cianna Medical and Vascular Insights continue to contribute to the company’s results. Further, the company stands to benefit from the execution of the global growth and profitability plan. Continued growth in the recently introduced EmboCube and the Torpedo embolic products buoys optimism. Robust Cardiovascular segment is an added positive.

However, escalating operating expenses remains a concern. Headwinds like stiff competition and higher consolidation in the healthcare industry add to woes. Contraction in both gross and operating margins is also worrisome.

Zacks Rank

Merit Medical currently carries a Zacks Rank #4 (Sell).

Key Picks

A few better-ranked stocks in the broader medical space are Hologic Inc. HOLX, DENTSPLY SIRONA Inc. XRAY and Teleflex Inc. TFX.

Hologic is scheduled to release second-quarter 2019 results on Jul 31. The Zacks Consensus Estimate for the to-be-reported quarter’s adjusted EPS is pegged at 61 cents and the same for revenues stands at $834.6 million. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY SIRONA is scheduled to release second-quarter 2019 results on Aug 2. The Zacks Consensus Estimate for second-quarter adjusted EPS and revenues is 62 cents and $1.03 billion, respectively. The stock sports a Zacks Rank #1.

Teleflex is expected to release second-quarter 2019 results on Aug 1. The Zacks Consensus Estimate for adjusted EPS for the to-be-reported quarter is $2.59 and the same for revenues is pegged at $636.7 million. The stock has a Zacks Rank of 2.

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