Merit Medical (MMSI) Q3 Earnings Top Estimates, FY23 View Revised
Merit Medical Systems, Inc. MMSI delivered adjusted earnings per share (EPS) of 75 cents in the third quarter of 2023, up by 17.2% year over year. The figure also surpassed the Zacks Consensus Estimate by 15.4%.
The adjustments include expenses related to the amortization of intangibles, and corporate transformation and restructuring, among others.
GAAP EPS for the quarter was 44 cents, up by 62.9% year over year.
Revenues in Detail
Merit Medical registered revenues of $315.2 million in the third quarter, up 9.8% year over year. The figure surpassed the Zacks Consensus Estimate by 2.9%.
Per management, the overall top line was driven by 14% growth in U.S. sales and 4% growth in international sales. Strong performance by both segments and the Cardiovascular segment’s product categories also contributed to the top line.
Total revenues at constant exchange rate (CER) inched up 9.7% year over year, whereas CER, organic revenues increased 7.1% year over year.
Segmental Details
Merit Medical operates through two segments — Cardiovascular and Endoscopy.
The Cardiovascular unit reported third-quarter revenues of $306.1 million, up 9.7% both on a reported basis and at CER year over year. This figure compares to our segmental projection of $296.9 million for the third quarter.
The Cardiovascular segment includes the following product categories: Peripheral Intervention (PI), Cardiac Intervention (CI), Custom Procedural Solutions (CPS) and original equipment manufacturer (OEM).
PI product line revenues were $128.4 million, up 16% on a reported basis and 15.9% at CER year over year. This compares to our projection of $118.8 million.
CI revenues of $89.1 million rose 2.6% on a reported basis and 2.8% at CER year over year. This compares to our projection of $91.6 million.
CPS revenues improved 6.4% on a reported basis and 6.3% at CER year over year to $48.6 million. This compares to our projection of $52.2 million.
OEM revenues climbed 11.9% on a reported basis and 11.3% at CER year over year to $39.9 million. This compares to our projection of $34.3 million.
Endoscopy devices’ revenues totaled $9.1 million, up 11.2% year over year both on a reported basis and at CER. This figure compares to our segmental projection of $9 million for the third quarter.
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 10.6% to $142.2 million. The gross margin expanded 34 basis points (bps) to 45.1%.
We had projected 46.7% of gross margin for the third quarter.
Selling, general & administrative expenses declined 3.3% to $86.9 million. Research and development expenses rose 2.2% year over year to $19.6 million. Adjusted operating expenses of $106.5 million decreased 2.3% year over year.
Adjusted operating profit totaled $35.7 million, reflecting an 82.4% jump from the prior-year quarter. The adjusted operating margin in the third quarter expanded 451 bps to 11.3%.
Financial Position
Merit Medical exited third-quarter 2023 with cash and cash equivalents of $58.7 million compared with $72.1 million at the second-quarter end. Total debt (including the current portion) at the end of third-quarter 2023 was $286.1 million compared with $338.9 million at the end of the second quarter.
Cumulative net cash flow provided by operating activities at the end of third-quarter 2023 was $82.9 million compared with $86.3 million a year ago.
2023 Guidance
Merit Medical has revised its 2023 outlook.
Net revenues for 2023 are now projected between $1.242 billion and $1.251 billion (reflecting an increase of approximately 8-9% over the comparable reported figures of 2022), up from the prior guidance of $1.230 billion-$1.244 billion (reflecting an increase of approximately 7-8%). The Zacks Consensus Estimate stands at $1.24 billion.
Net revenues from the Cardiovascular segment are now expected to be in the range of $1.205 - $1.214, representing an increase of approximately 8-9% over the comparable reported figures of 2022. This is up from the prior outlook of $1.193 billion-$1.207 billion, representing an increase of approximately 7-8% over the comparable reported figures of 2022.
The Endoscopy segment’s net revenues are now projected to be between $36.9 million and $37.0 million, representing an increase of approximately 13% over the comparable reported figures of 2022. This is narrower than the prior outlook of $36.8 million-$37 million, representing an increase of approximately 12-13% over the comparable reported figures of 2022.
Adjusted EPS for 2023 is now projected to be in the range of $2.93-$2.99, up from the prior outlook of $2.81-$2.92. The Zacks Consensus Estimate is pegged at $2.88.
Our Take
Merit Medical exited the third quarter of 2023 with better-than-expected results. The year-over-year uptick in the top and bottom lines was impressive. The company saw revenue growth in both its segments and across all the product categories within its Cardiovascular unit. Robust performances in the United States and outside were impressive. Strong execution and improving customer demand trends pushed up the overall top line, which was encouraging. The expansion of both margins bodes well for the stock.
In August, Merit Medical announced the completion of enrolment in its WRAPSODY Arteriovenous Access Efficacy pivotal study. In September, the company announced the U.S. commercial release of its Aspira Bottle, the latest addition to its drainage portfolio. These also look promising for the stock.
However, management’s expectations of CPS sales to decline in the fourth quarter on a year-over-year basis as demand trends for these kit product lines normalize do not bode well. The current challenging global macro environment also raises our apprehension.
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 Abbott Laboratories ABT, Boston Scientific Corporation BSX and West Pharmaceutical Services, Inc. WST.
Abbott, carrying a Zacks Rank of 2 (Buy), reported third-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.14 billion outpaced the consensus mark by 3.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.8%.
Boston Scientific reported third-quarter 2023 adjusted EPS of 50 cents, beating the Zacks Consensus Estimate by 4.2%. Revenues of $3.53 billion surpassed the Zacks Consensus Estimate by 1.8%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 12.8%. BSX’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.3%.
West Pharmaceutical reported third-quarter 2023 adjusted EPS of $2.16, beating the Zacks Consensus Estimate by 16.1%. Revenues of $747.4 million surpassed the Zacks Consensus Estimate by 0.1%. It currently carries a Zacks Rank #2.
West Pharmaceutical has a long-term estimated growth rate of 5.9%. WST’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 17.6%.
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