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Surmodics' (SRDX) IVD Unit Boosts Growth, R&D Focus Solid

On Aug 13, we issued an updated research report on Surmodics, Inc. SRDX. Apart from the growing the Medical Device and IVD businesses, Surmodics' efforts to boost research and development (R&D) functionalities buoy optimism.

The stock currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Price Performance

Surmodics has outperformed the industry in a year's time. The stock has returned 178.8% compared with the industry's rise of 15.3%. The return is also higher than the S&P 500 index's increase of 15.5%.

 

What’s Favoring Surmodics?

IVD Segment Driving Growth

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Surmodics’ performance continues to be driven by the In Vitro Diagnostics (IVD) unit. For more than 35 years, the segment has been a leader in developing an ELISA/EIA, immunoblot/western blot, line assay or microarray.

In the third quarter of fiscal 2018, sales in IVD increased 10.3% to $5.5 million. The upside came on the back of strong growth and stabilization across microarray and antigen product sales. Operating income in the segment was $2.2 million in the reported quarter, marginally down from the year-ago quarter’s level.

Consistent Efforts to Boost R&D

Surmodics’ solid efforts to improve R&D stature have been a key growth driver. The company’s whole product solutions pipeline and sirolimus-based below-the-knee DCB program deserve a mention here. The company has also made dramatic progress in the development of its AV fistula drug-coated balloon as well.

In the quarter under review, R&D expenses were $9.8 million, up 23.4% year over year. Considering the company’s strength in the R&D prospects, Surmodics has long-term goals of generating double-digit top-line growth by the end of 2019 and EBITDA margins at or above 30% by fiscal 2021.

Guidance

Buoyed by the above factors, Surmodics raised guidance for fiscal 2018.

The company expects fiscal 2018 revenues in the range of $79-$81 million, up from the previous range of $75-$79 million. The Zacks Consensus Estimate is currently pegged at $80.8 million, within the guidance.

The company expects fiscal 2018 EPS in the range of 39-44 cents, compared with the previous estimate of negative 6 cents and 9 cents. The Zacks Consensus Estimate is currently pegged at 43 cents, within the guidance.

Other Key Picks

A few other top-ranked stocks in the MedTech space are Inogen Inc INGN, Integer Holdings Corporation ITGR and The Cooper Companies COO. Inogen has a Zacks Rank #2 (Buy). Integer and The Cooper Companies sport a Zacks Rank #1.

Inogen has a long-term expected earnings growth rate of 22.5%, while the same for Integer Holdings and The Cooper Companies isat 15% and 10.8%, respectively.

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Inogen, Inc (INGN) : Free Stock Analysis Report
 
Integer Holdings Corporation (ITGR) : Free Stock Analysis Report
 
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The Cooper Companies, Inc. (COO) : Free Stock Analysis Report
 
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