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Merit Medical (MMSI) Q1 Earnings Beat, FY22 View Unchanged

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Merit Medical Systems, Inc. (MMSI - Free Report) delivered adjusted earnings per share (“EPS”) of 53 cents in the first quarter of 2022, up by a penny year over year. The figure also surpassed the Zacks Consensus Estimate by 12.8%.

The adjustments include expenses related to amortization of intangibles, and corporate transformation and restructuring, among others.

GAAP EPS for the quarter was 18 cents a share, down by a penny year over year.

Revenues in Detail

Merit Medical registered revenues of $275.4 million in the first quarter, up 10.6% year over year. The figure surpassed the Zacks Consensus Estimate by 4.5%.

Constant exchange rate (“CER”), organic revenues inched up 11.3% year over year on the back of 7.4% growth in the United States and 16.6% growth in international sales during the period.

Per management, the top line was primarily driven by 11.5% growth in sales of cardiovascular products and 7.6% growth in sales of endoscopy products.

Segmental Details

Merit Medical operates through two segments — Cardiovascular and Endoscopy.

The Cardiovascular unit reported first-quarter revenues of $266.9 million, up 10.8% year over year.

The Cardiovascular segment includes the following product categories: Peripheral Intervention, Cardiac Intervention, Custom Procedural Solutions and original equipment manufacturer (“OEM”).

Peripheral Intervention product line revenues were $105.8 million, up 13.8% year over year. Cardiac Intervention revenues rose 9% to $81.5 million. OEM revenues climbed 19.6% to $33.4 million, whereas Custom Procedural Solutions revenues climbed 1.9% to $46.3 million.

Endoscopy devices’ revenues totaled $8.5 million, up 7.2% year over year, driven primarily by a 13% increase in sales of the EndoMAXX line and a 14% uptick in the sales of other stents.

Merit Medical Systems, Inc. Price, Consensus and EPS Surprise

Merit Medical Systems, Inc. Price, Consensus and EPS Surprise

Merit Medical Systems, Inc. price-consensus-eps-surprise-chart | Merit Medical Systems, Inc. Quote

Margins

In the quarter under review, Merit Medical’s gross profit rose 8.1% to $120.9 million. However, gross margin contracted 105 basis points (bps) to 43.9%.

Selling, general & administrative expenses rose 3.7% to $84 million. Research and development expenses went up 6.8% year over year to $17.4 million. Adjusted operating expenses of $101.4 million increased 4.2% year over year.

Adjusted operating profit totaled $19.5 million, reflecting a 33.6% uptick from the prior-year quarter. Adjusted operating margin in the first quarter expanded by 122 bps to 7.1%.

Financial Position

Merit Medical exited first-quarter 2022 with cash and cash equivalents of $53.9 million compared with $67.8 million at the end of 2021. Total debt (including the current portion) at the end of first-quarter 2022 was $252.5 million compared with $242.8 million at the end of 2021.

Net cash flow from operating activities at the end of first-quarter 2022 was $12 million compared with $35.2 million a year ago.

2022 Guidance

Merit Medical has reiterated its 2022 outlook.

Net revenues for 2022 are continued to be projected between $1.117-$1.140 billion, reflecting an increase of approximately 4-6% over the comparable reported figure of 2021. The Zacks Consensus Estimate for the same is pegged at $1.13 billion.

Net revenues from the cardiovascular segment are expected in the range of $1.083-$1.106 billion, representing an increase of approximately 4-6% over the comparable reported figure of 2021.

Endoscopy segment’s net revenues are expected in the range of $33.5-$34.1 million, reflecting an uptick of around 6-8% over the comparable reported figure of 2021.

Adjusted EPS for 2022 are projected in the range of $2.41-$2.56. The Zacks Consensus Estimate for the same stands at $2.49.

Our Take

Merit Medical exited the first quarter of 2022 with better-than-expected results. The company saw revenue growth in both its Cardiovascular and Endoscopy segments, as well as across all product categories within its Cardiovascular unit. Solid product sales are also promising. Robust performances in both the United States and outside are impressive. Strong execution and improving customer demand trends pushed up the overall top line, which is encouraging.

The company stands to benefit from the execution of its global growth and profitability plan. A robust product line raises investors’ optimism on the stock. Expansion of adjusted operating margin also bodes well.

However, contraction in the gross margin is disappointing. Stiff competition and higher consolidation in the healthcare industry are dampeners.

Zacks Rank and Key Picks

Merit Medical currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Qiagen N.V. (QGEN - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Centene Corporation (CNC - Free Report) .

Qiagen, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of 80 cents, which beat the Zacks Consensus Estimate by 12.7%. Revenues of $628.4 million outpaced the consensus mark by 6.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Qiagen has an estimated long-term growth rate of 11.5%. QGEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.7%.

UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Centene reported first-quarter 2022 adjusted EPS of $1.83, which surpassed the Zacks Consensus Estimate by 8.9%. First-quarter revenues of $37.2 billion outpaced the Zacks Consensus Estimate by 7.2%. It currently has a Zacks Rank #2.

Centene has an estimated long-term growth rate of 14.2%. CNC has an earnings yield of 6.6% compared with the industry’s 5.6%.