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SurModics Upgraded to Strong Buy

SRDX PTN

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On January 10, Zacks Investment Research upgraded SurModics, Inc. (SRDX - Analyst Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

SurModics performed impressively in the fourth quarter of fiscal 2012 (ended September 30, 2012), which included a positive earnings surprise of 11.8%. The impressive performance in the final quarter of fiscal 2012 was primarily attributable to higher revenues.

Surmodics, a provider of surface modification and drug delivery technologies to the healthcare industry, performed well throughout fiscal 2012, delivering positive earnings surprises in 3 of the 4 quarters with an average beat of 19.7%.  

Surmodics provided an upbeat forecast for fiscal 2013. The company expects fiscal 2013 revenues in the range of $55-$58 million, up 6%-12% year over year. Moreover, fiscal 2013 earnings are expected in the range of 75 cents-87 cents per share, well above the adjusted earnings of 61 cents earned in fiscal 2012. The long-term expected earnings growth rate for the stock is 15.0%.    

SurModics has taken a number of steps to increase efficiencies, including trimming its work-force and appointing a new Chief Executive Officer. Moreover, the company’s move to sell its Pharmaceutical unit to focus on its core business is a prudent move.

Last month, SurModics appointed Andy LaFrence as its new chief financial officer and Vice President of finance. The appointment of LaFrence is expected to be beneficial to SurModics since he is vastly experienced in the finance and capital markets.

The Zacks Consensus Estimate for fiscal 2013 increased 34.8% year over year to 82 cents per share. The Zacks Consensus Estimate for fiscal 2014 is currently pegged at 98 cents per share, reflecting year-over-year growth of 18.7%.

Other Stocks to Consider

Stocks such as Palatin Technologies, Inc.  (PTN - Snapshot Report) and Quidel Corporation (QDEL), operating in the same industry as SurModics, are also performing well and are worth considering. While Palatin Technologies carries a Zacks Rank #1 (Strong Buy), Quidel Corporation carries a Zacks Rank #2 (Buy).

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