Merit Medical Systems, Inc. (MMSI Quick QuoteMMSI - Free Report) delivered adjusted earnings per share (EPS) of 64 cents in the third quarter of 2022, up by 23.1% year over year. The figure also surpassed the Zacks Consensus Estimate by 20.8%.

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

Our projection of adjusted EPS was 54 cents.

GAAP EPS for the quarter was 27 cents a share, up by 28.6% year over year.

Revenues in Detail

Merit Medical registered revenues of $287.2 million in the third quarter, up 7.5% year over year. The figure surpassed the Zacks Consensus Estimate by 5.2%.

The third-quarter revenue compares to our estimate of $273.1 million.

Per management, the overall top line was driven by an 8.6% growth in U.S. sales and 6.1% growth in international sales. Strong segmental performances also contributed to the top line.

Constant exchange rate, organic revenues inched up 10.5% year over year on the back of more favorable-than-anticipated demand trends from customers in the United States, EMEA and APAC regions during the period.

Segmental Details

Merit Medical operates through two segments — Cardiovascular and Endoscopy.

The Cardiovascular unit reported third-quarter revenues of $278.9 million, up 7.4% year over year on a reported basis. Constant exchange rate, organic revenues inched up 10.4% year over year.

This figure compares to our segmental projection of $265.3 million for the third quarter.

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

PI product line revenues were $110.7 million, up 9.5% year over year. CI revenues rose 8.8% to $86.8 million. OEM revenues climbed 21.5% to $35.7 million, whereas CPS revenues declined 7.6% to $45.7 million.

Endoscopy devices’ revenues totaled $8.2 million, up 12.4% year over year, driven primarily by strong demand for Merit Medical’s Elation esophageal balloon product and EndoMAXX fully covered esophageal stents. Constant exchange rate, organic revenues inched up 13.6% year over year.

This figure compares to our segmental projection of $7.8 million for the third quarter.

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 6.7% to $128.6 million. However, the gross margin contracted 35 basis points (bps) to 44.8%.

We had projected 46.1% of gross margin for Q3.

Selling, general & administrative expenses rose 3.8% to $89.8 million. Research and development expenses went up 13.2% year over year to $19.2 million. Adjusted operating expenses of $109 million increased 5.4% year over year.

Adjusted operating profit totaled $19.6 million, reflecting a 14.8% uptick from the prior-year quarter. Adjusted operating margin in the third quarter expanded by 43 bps to 6.8%.

Financial Position

Merit Medical exited third-quarter 2022 with cash and cash equivalents of $51.5 million compared with $63 million at the end of the second quarter. Total debt (including the current portion) at the end of third-quarter 2022 was $216.7 million compared with $246 million at the end of the second quarter.

Cumulative net cash flow from operating activities at the end of third-quarter 2022 was $86.3 million compared with $101.4 million a year ago.

2022 Guidance

Merit Medical has revised its 2022 outlook.

Net revenues for 2022 are now projected between $1.145 billion and $1.151 billion, reflecting an increase of approximately 6.5-7.1% over the comparable reported figures of 2021. The company’s earlier projection for full-year net revenues was $1.123 billion and $1.135 billion, reflecting an increase of approximately 5-6% over the comparable reported figures of 2021. The Zacks Consensus Estimate for the same is pegged at $1.13 billion.

Net revenues from the cardiovascular segment are now expected in the range of $1.112 - $1.117 billion, representing an increase of approximately 6.6-7.1% over the comparable reported figures of 2021. Merit Medical’s previous projections were net revenues of $1.093-$1.102 billion, representing an increase of approximately 5-6% over the comparable reported figures of 2021.

Endoscopy segment’s net revenues are now projected to be between $32.7-$33.2 million, representing an increase of approximately 3.8-5.4% over the comparable reported figures of 2021. The earlier expected range was $30 million and $34 million, representing a range of a 5% decline to an 8% increase over the comparable reported figures of 2021.

Adjusted EPS for 2022 are now projected to be $2.55-$2.61 compared with the previous expectation of $2.42-$2.52. The Zacks Consensus Estimate for the same stands at $2.47.

Our Take

Merit Medical exited the third quarter of 2022 with better-than-expected results. The year-over-year uptick in the top and bottom lines is impressive. The company saw revenue growth in both Cardiovascular and Endoscopy segments, and across the majority of its product categories within its Cardiovascular unit. Solid product sales are also promising. Robust performances in 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 about the stock. The expansion of the adjusted operating margin also bodes well. Merit Medical announced U.S. commercial releases of the TEMNO Elite Soft Tissue Biopsy System and the Prelude Roadster Guide Sheath (both in September). The company also launched its SafeGuard Focus Cool Compression Device in August. These also look promising for the stock.

However, a decline in the CPS revenues during the reported quarter is concerning. Rising product costs putting pressure on Merit Medical’s margin, thereby leading to a contraction of the gross margin, does not look encouraging. The current challenging global macro environment raises our apprehension.

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 Elevance Health Inc. (ELV Quick QuoteELV - Free Report) , Medpace Holdings, Inc. (MEDP Quick QuoteMEDP - Free Report) and Centene Corporation (CNC Quick QuoteCNC - Free Report) .

Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.

Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.

Medpace Holdings has an estimated growth rate of 29.7% for the full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.

Centene Corporation, carrying a Zacks Rank #2, reported third-quarter 2022 adjusted EPS of $1.30, which beat the Zacks Consensus Estimate by 6.6%. Revenues of $35.87 billion outpaced the consensus mark by 1.1%.

Centene Corporation has an estimated long-term growth rate of 14.2%. CNC’s earnings surpassed estimates in all the trailing four quarters, the average being 5.2%.