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Merit Medical (MMSI) Q4 Earnings & Revenues Surpass Estimates

Zacks Equity Research

Merit Medical Systems, Inc. MMSI reported fourth-quarter 2018 adjusted earnings per share (EPS) of 48 cents, which exceeded the Zacks Consensus Estimate of 45 cents. The bottom line also improved 45.5% from the year-ago quarter’s tally.

This Utah-based provider of peripheral and cardiac intervention products reported worldwide revenues of $233.2 million, up 22.2% from the year-ago quarter’s tally. On a comparable, constant-currency basis, the metric increased 13.1% year over year. Revenues surpassed the Zacks Consensus Estimate of $230.1 million.

2018 at a Glance

Merit Medical reported 2018 worldwide revenues of $882.8 million, up 21.3% on a year-over-year basis.

Notably, the company generates revenues through two segments — the Cardiovascular unit and the Endoscopy devices segment.

The Cardiovascular segment recorded revenues of $849.5 million (96.2% of net revenues).

The Endoscopy devices segment’s revenues amounted to $33.3 million (3.8% of net revenues).

Segmental Analysis

Cardiovascular

The Cardiovascular unit recorded fourth-quarter revenues of $225.1 million, up 22.7% year over year. The upside can be attributed to a 40.5% year-over-year increase in the segment’s Stand-alone devices to $101.2 million. Also, revenues from Catheters increased 24.9% to $41.7 million. Inflation devices revenues grew 11% year over year to $22.8 million. The same at the CRM/EP unit rose 27.5% to $12.7 million.

On the flip side, revenues from Custom kits and procedure trays unit, under the Cardiovascular segment, declined 1.7%to $34.4 million. Also, embolization devices’ revenues decreased 2.1% to $12.3 million.

Endoscopy Devices

Revenues from the Endoscopy devices totaled $8.2 million, up 9.9% year over year.

Margins

In the quarter under review, gross profit totaled $104.7 million, up 22.2% on a year-over-year basis. Gross margin came in at 44.9% of net revenues, almost flat year over year. Adjusted gross margins expanded 150 basis points (bps) on a year-over-year basis to 49.4% of net revenues.

Merit Medical registered selling, general and administrative expenses of $75.6 million, up 27.7% year over year.

Meanwhile, research and development expenses summed $15.4 million, up 20.8% year over year.

Adjusted operating income in the quarter totaled $13.7 million. Adjusted operating margin was 5.9% of net revenues, down 130 basis points (bps) year over year.

2019 Guidance

Merit Medical issued guidance for 2019.

This Zacks Rank #2 (Buy) company expects full-year revenues in the band of $1.01-$1.03 billion.The Zacks Consensus Estimate for the same is pegged at $1.01 billion, in line with the lower end of the guided range.

Adjusted EPS are expected between $1.97 and $2.08. The Zacks Consensus Estimate for the same is pinned at $1.97, in line with the lower end of the projected range.

The company expects adjusted gross margins within 50.6-51.3%.

Wrapping Up

Merit Medical exited the fourth quarter of 2018 on a solid note, with considerable expansion in adjusted gross margins. Furthermore, upbeat guidance for 2019 indicates at the company’s bright prospects. A robust Cardiovascular segment is an added positive.

Management is optimistic about Merit Medical’s Becton Dickinson deal, the acquisitions of Cianna Medical and Vascular Insights, and the execution of the global growth and profitability plan. New products like EmboCube Embolization Gelatin, the basixTAU Inflation Device, the Prelude Prestige Splittable Sheath Introducer, the Prelude Ideal Sheath Introducer, thePreludeSYNC Radial Hemostasis Device are likely to expand the company’s customer base.

However, surging operating expenses is concerning. Headwinds like stiff competition and higher consolidation in the healthcare industry add to the woes. Sluggishness in the Custom kits and procedure trays and Embolization devices units is also worrisome.

Key Picks

Other top-ranked stocks in the MedTech space are Surmodics, Inc SRDX, Abbott Laboratories ABT and Cardiovascular Systems, Inc. CSII.

Surmodics has a long-term expected earnings growth rate of 10%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abbott’s long-term earnings growth rate is projected at 11.7%. The stock carries a Zacks Rank #2.

Cardiovascular Systems exceeded the Zacks Consensus Estimate in each of the trailing four quarters, the average being 77.1%. The stock sports a Zacks Rank of 1.

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