Back to top

Analyst Blog

On Nov 29, we downgraded our recommendation on SurModics Inc. (SRDX - Analyst Report) from Neutral to Underperform following below par fourth-quarter fiscal 2013 (ended Sept 30, 2013) results and a disappointing guidance for fiscal 2014.

Why the Downgrade?

Though SurModics reported higher-than-expected earnings in the final quarter of fiscal 2013 due to cost savings, revenues were below expectations hurt by below par hydrophilic coating revenues. Moreover, the company reported lower-than-expected revenues as well as earnings in fiscal 2013.

SurModics’ lackluster earnings guidance for fiscal 2014 is also disappointing. We have trimmed our fiscal 2014 estimates (earnings as well as revenues) following the disappointing performance of the company and the bleak fiscal 2014 outlook.

The negative sentiment is also reflected by the downward earnings estimate revisions witnessed by SurModics. The Zacks Consensus Estimate for fiscal 2014 currently stands at 88 cents per share, down 7 cents since the earnings announcement due to the downward revisions.

Moreover, we believe that since royalties are a major source of revenues at SurModics, any royalty related setback like the discontinuation of Johnson & Johnson’s(JNJ - Analyst Report) Cypher stent in 2011 will affect the top line significantly.

In view of these negatives, we have downgraded SurModics to Underperform. We believe that there is little reason for investors to hold on to the stock at current levels. SurModics carries a Zacks Rank #5 (Strong Sell) in the short run.

Other Stocks Worth Considering

Some better-ranked stocks in the same sector include Advaxis, Inc. (ADXS) and NuVasive, Inc. (NUVA - Snapshot Report). Both these stocks have a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%