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Surmodics (SRDX) Q2 Earnings and Revenues Beat Estimates

Zacks Equity Research

Surmodics, Inc. SRDX delivered adjusted earnings per share (EPS) of 7 cents in second-quarter fiscal 2019, which surpassed the Zacks Consensus Estimate of break-even earnings. Meanwhile, the bottom line is flat with the year-ago quarter’s figure.

Reported EPS came in at 9 cents compared with 11 cents in the year-earlier period.

Revenues in the quarter increased 18.9% year over year to $22.7million. This figure also outpaced the Zacks Consensus Estimate by 8.1%.

Q2 Highlights

In the quarter under review, Product sales were $9.9 million, up 13.8% year over year. Royalty and license fee revenues totaled $9.9 million, up 17.8% from the prior-year quarter. Research, development and other were $2.9 million, up 46.9% year over year.

In the reported quarter, the enrollments under Surmodics’ TRANSCEND clinical trial continued and 75% of it was completed.

Segmental Analysis

Medical Device

In the reported quarter, sales at the segment rose 23.1% to $17.3 million including $1.6 million from the SurVeil agreement with Abbott (ABT).

The Medical Device business unit also incurred $0.02 million of operating loss in the second quarter against an operating income of $0.23 million a year ago.

 

Surmodics, Inc. Price, Consensus and EPS Surprise

Surmodics, Inc. Price, Consensus and EPS Surprise

Surmodics, Inc. price-consensus-eps-surprise-chart | Surmodics, Inc. Quote

 

In Vitro Diagnostics

In the quarter under review, sales increased 7.4% to $5.4 million, reflecting growth in sales of the company’s chemical components, used in diagnostic tests and its microarray slides.

Operating income at the segment was $2.9 million in the reported quarter, up 20.3% from the same period last year.

Operational Details

Surmodics registered Product costs of $3.1 million in the quarter, up 6.9% year over year.

The company’s research and development costs totaled $13.6 million, up 25.8% year over year.

Selling, general and administrative expenditures were almost $4.9 million, down 24.3% from the prior-year quarter.

Total operating costs and expenses in the quarter were $21.8 million, up 17.8% year over year.

Fiscal 2019 Guidance Revised

Surmodics has lowered its fiscal 2019 revenue expectation to $88.5-91.5 million from the earlier expected range of $94-$97 million.

Adjusted EPS is now projected between 26 cents and 36 cents compared with the previous projection of 2-22 cents. The Zacks Consensus Estimate for the metric is pegged at EPS of 15 cents, within the guided range.

Our Take

Surmodics exited the fiscal second quarter on a strong note with EPS and revenues outpacing estimates. The company continues to gain from its core Medical Devices unit, which saw a significant contribution from the SurVeil deal with Abbott in the quarter. Strong sales of the company’s chemical components drove the IVD segment. Management is also upbeat about the ongoing TRANSCEND enrollment. Additionally, the company hopes top clinch a CE mark for SurVeil in Europe in the near future.  The company’s FDA 510 (k) clearance for its Sublime guide sheath for radial access also buoys investors’ optimism on the stock.

On the flip side, a trimmed revenue guidance for fiscal 2019 and surging operating expenses raise a concern. Surmodics’ drug-coated balloons face stiff competition in the niche space.

Zacks Rank

Surmodics currently carries a Zacks Rank #3 (Hold).

Earnings of MedTech Majors at a Glance

Some other better-ranked stocks with solid results this earnings season are Stryker Corporation SYK, Abbott Laboratories ABT and CONMED Corporation CNMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered first-quarter 2019 adjusted EPS of $1.88, beating the Zacks Consensus Estimate by 2.2%. Meanwhile, revenues of $3.52 billion were in line with the consensus estimate.

Abbott reported first-quarter 2019 adjusted EPS of 63 cents, topping the Zacks Consensus Estimate by 3.3%. Moreover, worldwide sales of $7.54 billion came above the consensus estimate of $7.47 billion.

CONMED posted first-quarter 2019 adjusted EPS of 57 cents, which exceeded the Zacks Consensus Estimate of 54 cents. Also, revenues of $218.4 million outshined the consensus mark of $213 million.

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