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Merit Medical (MMSI) Down 0.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Merit Medical (MMSI). Shares have lost about 0.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Merit Medical due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Merit Medical Q4 Earnings Top Estimates, Gross Margin Up

Merit Medical delivered adjusted earnings per share of 81 cents in the fourth quarter of 2023, up 2.5% year over year. The figure also surpassed the Zacks Consensus Estimate by 5.2%.

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The adjustments include expenses related to the amortization of intangibles, and Medical Device Regulation expenses, among others.

GAAP earnings per share for the quarter was 47 cents, down 18.9% year over year.

Full-year 2023 adjusted earnings per share was $3.01, down 11.5% compared with that at the end of the comparable 2022 period. The figure topped the Zacks Consensus Estimate by 1.3%.

Revenues in Detail

Merit Medical registered revenues of $$324.5 million in the fourth quarter, up 10.6% year over year. The figure surpassed the Zacks Consensus Estimate by 1.7%.

Total revenues at CER inched up 10.3% year over year, whereas CER, organic revenues increased 8.3% year over year.

Per management, the better-than-expected CER revenue growth in the fourth quarter was driven by strong organic growth, reflecting particular strength in PI, CPS and OEM product categories, and relatively balanced contributions from both the U.S. and international markets.

Full-year 2023 revenues were $1.26 billion, reflecting a 9.2% uptick from the comparable 2022 period. The figure topped the Zacks Consensus Estimate by 0.8%.

Geographic Results

The U.S. sales increased 13% on CER basis and 9% on a CER, organic basis.

International sales increased 7% on a CER, organic basis, driven primarily by 7% growth in Europe, the Middle East, and Africa region, 30% growth in the rest of the world region and 4% growth in the Asia-Pacific region.

Segmental Details

Merit Medical operates through two segments — Cardiovascular and Endoscopy.

The Cardiovascular unit reported fourth-quarter revenues of $315.2 million, up 10.3% on a reported basis and 10.1 % at CER year over year.

The Cardiovascular segment includes the following product categories: PI, CI, CPS and OEM.

PI product line revenues were $134.1 million, up 19.4% on a reported basis and 19% at CER year over year.

CI revenues of $90.2 million rose 5.8% on a reported basis and 5.6% at CER year over year.

CPS revenues improved 1% on a reported basis and 0.8% at CER year over year to $49.6 million.

OEM revenues climbed 6.1% on a reported basis and 5.7% at CER year over year to $41.2 million.

Endoscopy devices’ revenues totaled $9.3 million, up 19.9% year over year on a reported basis and 20% at CER.

Margins

In the quarter under review, Merit Medical’s gross profit rose 11.9% to $150.5 million. The gross margin expanded 53 basis points (bps) to 46.4%.

Selling, general & administrative expenses increased 15% to $95.8 million. Research and development expenses rose 5.9% year over year to $21.6 million. Adjusted operating expenses of $117.4 million climbed 13.2% year over year.

Adjusted operating profit totaled $33.1 million, reflecting a 7.3% increase from the prior-year quarter. The adjusted operating margin in the fourth quarter contracted 31 bps to 10.2%.

Financial Position

Merit Medical exited 2023 with cash and cash equivalents of $587 million compared with $58.4 million at 2022-end. Total debt (including the current portion) at the end of 2023 was $823 million compared with $198 million at 2022-end.

Cumulative net cash flow provided by operating activities at the end of 2023 was $145.2 million compared with $114.3 million a year ago.

2024 Guidance

Merit Medical has initiated its 2024 outlook.

Net revenues for 2024 are projected to be between $1.312 billion and $1.325 billion (reflecting an increase of approximately 4-5% over the comparable reported figures of 2022). The Zacks Consensus Estimate stands at $1.33 billion.

Net revenues from the Cardiovascular segment are expected to be in the range of $1.272 billion-$1.285 billion, representing an increase of approximately 4-5% over the comparable reported figures of 2022.

The Endoscopy segment’s net revenues are now projected to be between $39.7 million and $40.1 million, representing an increase of approximately 8-9% over the comparable reported figures of 2022.

Adjusted earnings per share for 2024 is projected to be in the range of $3.28-$3.35, representing an increase of approximately 9-11% over the comparable reported figures of 2022. The Zacks Consensus Estimate is pegged at $3.32.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Merit Medical has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Merit Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Merit Medical belongs to the Zacks Medical - Dental Supplies industry. Another stock from the same industry, West Pharmaceutical Services (WST), has gained 10.4% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.

West Pharmaceutical reported revenues of $732 million in the last reported quarter, representing a year-over-year change of +3.3%. EPS of $1.83 for the same period compares with $1.77 a year ago.

West Pharmaceutical is expected to post earnings of $1.31 per share for the current quarter, representing a year-over-year change of -33.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -9.5%.

West Pharmaceutical has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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