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Merit Medical (MMSI) Q4 Earnings Top Estimates, Margins Down
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Merit Medical Systems, Inc. (MMSI - Free Report) delivered adjusted earnings per share (EPS) of 79 cents for the fourth quarter of 2022, up by 11.3% year over year. The figure also surpassed the Zacks Consensus Estimate by 17.9%.
The adjustments include expenses related to the amortization of intangibles, and corporate transformation and restructuring, among others.
Our projection of adjusted EPS was 66 cents.
GAAP EPS for the quarter was 58 cents a share, up 61.1% year over year.
Full-year adjusted EPS was $2.70, up 13.9% from 2021. Our projection of full-year adjusted EPS was $2.56.
Revenues in Detail
Merit Medical registered revenues of $293.4 million in the fourth quarter, up 5.4% year over year. The figure surpassed the Zacks Consensus Estimate by 1.3%.
Fourth-quarter revenues compare to our estimate of $288 million.
Per management, the overall top line was driven by 7% growth in U.S. sales and 3% growth in international sales. Strong performance by the Cardiovascular segment and the majority of its product categories also contributed to the top line.
Constant exchange rate (CER), organic revenues rose 8.2% year over year, primarily on the back of a more favorable-than-anticipated international sales trend, particularly in the EMEA region, and demand in the United States, which was in line with the growth expectations Merit Medical had outlined on its third-quarter call.
Full-year revenues were $1.15 billion, reflecting a 7.1% improvement from the comparable 2021 period. CER, organic revenues increased 9.3%.
Our projection of full-year reported revenues was $1.15 billion, which matched the company-reported figures.
Segmental Details
Merit Medical operates through two segments — Cardiovascular and Endoscopy.
The Cardiovascular unit reported fourth-quarter revenues of $285.7 million, up 5.7% year over year on a reported basis. CER, organic revenues inched up 8.7% year over year.
This figure compares to our segmental projection of $280 million for the fourth quarter.
The Cardiovascular segment includes the following product categories: Peripheral Intervention (PI), Cardiac Intervention (CI), Custom Procedural Solutions (CPS) and original equipment manufacturer (OEM).
On a reported basis, PI product line revenues were $112.4 million, up 6.5% year over year, whereas CI revenues rose 6% to $85.3 million. OEM revenues climbed 15% to $38.9 million, whereas CPS revenues declined 2.6% to $49.1 million, both on a reported basis.
This compares to our projections of $110.1 million, $83.4 million, $36.7 million and $49.8 million, respectively.
Endoscopy devices’ revenues totaled $7.7 million, down 6.3% year over year. CER, organic revenues also declined 5.5% year over year.
This figure compares to our segmental projection of $8 million for the fourth quarter.
Merit Medical Systems, Inc. Price, Consensus and EPS Surprise
In the quarter under review, Merit Medical’s gross profit rose 4.5% to $134.6 million. However, the gross margin contracted 39 basis points (bps) to 45.9%.
We had projected 47.6% of gross margin for the fourth quarter.
Selling, general & administrative expenses rose 8.6% to $83.2 million. Research and development expenses inched up 0.1% year over year to $20.4 million. Adjusted operating expenses of $103.7 million increased 6.8% year over year.
Adjusted operating profit totaled $30.9 million, reflecting a 2.8% decline from the prior-year quarter. Adjusted operating margin in the fourth quarter contracted 89 bps to 10.5%.
Financial Position
Merit Medical exited the full-year 2022 with cash and cash equivalents of $58.4 million compared with $67.8 million at the end of 2021. Total debt (including the current portion) at the end of full-year 2022 was $198 million compared with $242.8 million at the end of 2021.
Cumulative net cash flow from operating activities at the end of 2022 was $114.3 million compared with $147.2 million a year ago.
2023 Guidance
Merit Medical has issued its 2023 outlook.
Net revenues for 2023 are projected to be between $1.194 billion and $1.210 billion, reflecting an increase of approximately 4-5% over the comparable reported figures of 2022. The Zacks Consensus Estimate for the same is pegged at $1.20 billion.
Net revenues from the cardiovascular segment are expected to be in the range of $1.156 billion-$1.172 billion, representing an increase of approximately 3-5% over the comparable reported figures of 2022.
The endoscopy segment’s net revenues are projected to be between $37.5 million and $37.8 million, representing an increase of approximately 14-16% over the comparable reported figures of 2022.
Adjusted EPS for 2023 are projected to be within $2.80-$2.89. The Zacks Consensus Estimate for the same stands at $2.82.
Our Take
Merit Medical exited the fourth 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 its Cardiovascular segment and across the majority of its product categories within its Cardiovascular unit. 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. This month, Merit Medical announced that the FDA had granted Breakthrough Device Designation for the SCOUT MD Surgical Guidance System. In November 2022, the company announced the U.S. commercial release of the basixALPHA Inflation Device and the U.S. commercial release of the PreludeSYNC EZ Radial Compression Device. These also look promising for the stock.
However, a decline in the CPS and Endoscopy revenues during the reported quarter is concerning. Rising product costs putting pressure on Merit Medical’s margin, thereby leading to a contraction of both margins, does not look encouraging. The current challenging global macro environment raises our apprehension.
Zacks Rank and Other Key Picks
Merit Medical currently has a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Becton, Dickinson and Company (BDX - Free Report) , popularly known as BD, McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
BD, carrying a Zacks Rank #2, reported first-quarter fiscal 2023 adjusted EPS of $2.98, beating the Zacks Consensus Estimate by 11.6%. Revenues of $4.59 billion outpaced the consensus mark by 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BD has a long-term estimated growth rate of 7.8%. BDX’s earnings surpassed estimates in all the trailing four quarters, the average being 6.5%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
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Merit Medical (MMSI) Q4 Earnings Top Estimates, Margins Down
Merit Medical Systems, Inc. (MMSI - Free Report) delivered adjusted earnings per share (EPS) of 79 cents for the fourth quarter of 2022, up by 11.3% year over year. The figure also surpassed the Zacks Consensus Estimate by 17.9%.
The adjustments include expenses related to the amortization of intangibles, and corporate transformation and restructuring, among others.
Our projection of adjusted EPS was 66 cents.
GAAP EPS for the quarter was 58 cents a share, up 61.1% year over year.
Full-year adjusted EPS was $2.70, up 13.9% from 2021. Our projection of full-year adjusted EPS was $2.56.
Revenues in Detail
Merit Medical registered revenues of $293.4 million in the fourth quarter, up 5.4% year over year. The figure surpassed the Zacks Consensus Estimate by 1.3%.
Fourth-quarter revenues compare to our estimate of $288 million.
Per management, the overall top line was driven by 7% growth in U.S. sales and 3% growth in international sales. Strong performance by the Cardiovascular segment and the majority of its product categories also contributed to the top line.
Constant exchange rate (CER), organic revenues rose 8.2% year over year, primarily on the back of a more favorable-than-anticipated international sales trend, particularly in the EMEA region, and demand in the United States, which was in line with the growth expectations Merit Medical had outlined on its third-quarter call.
Full-year revenues were $1.15 billion, reflecting a 7.1% improvement from the comparable 2021 period. CER, organic revenues increased 9.3%.
Our projection of full-year reported revenues was $1.15 billion, which matched the company-reported figures.
Segmental Details
Merit Medical operates through two segments — Cardiovascular and Endoscopy.
The Cardiovascular unit reported fourth-quarter revenues of $285.7 million, up 5.7% year over year on a reported basis. CER, organic revenues inched up 8.7% year over year.
This figure compares to our segmental projection of $280 million for the fourth quarter.
The Cardiovascular segment includes the following product categories: Peripheral Intervention (PI), Cardiac Intervention (CI), Custom Procedural Solutions (CPS) and original equipment manufacturer (OEM).
On a reported basis, PI product line revenues were $112.4 million, up 6.5% year over year, whereas CI revenues rose 6% to $85.3 million. OEM revenues climbed 15% to $38.9 million, whereas CPS revenues declined 2.6% to $49.1 million, both on a reported basis.
This compares to our projections of $110.1 million, $83.4 million, $36.7 million and $49.8 million, respectively.
Endoscopy devices’ revenues totaled $7.7 million, down 6.3% year over year. CER, organic revenues also declined 5.5% year over year.
This figure compares to our segmental projection of $8 million for the fourth 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 4.5% to $134.6 million. However, the gross margin contracted 39 basis points (bps) to 45.9%.
We had projected 47.6% of gross margin for the fourth quarter.
Selling, general & administrative expenses rose 8.6% to $83.2 million. Research and development expenses inched up 0.1% year over year to $20.4 million. Adjusted operating expenses of $103.7 million increased 6.8% year over year.
Adjusted operating profit totaled $30.9 million, reflecting a 2.8% decline from the prior-year quarter. Adjusted operating margin in the fourth quarter contracted 89 bps to 10.5%.
Financial Position
Merit Medical exited the full-year 2022 with cash and cash equivalents of $58.4 million compared with $67.8 million at the end of 2021. Total debt (including the current portion) at the end of full-year 2022 was $198 million compared with $242.8 million at the end of 2021.
Cumulative net cash flow from operating activities at the end of 2022 was $114.3 million compared with $147.2 million a year ago.
2023 Guidance
Merit Medical has issued its 2023 outlook.
Net revenues for 2023 are projected to be between $1.194 billion and $1.210 billion, reflecting an increase of approximately 4-5% over the comparable reported figures of 2022. The Zacks Consensus Estimate for the same is pegged at $1.20 billion.
Net revenues from the cardiovascular segment are expected to be in the range of $1.156 billion-$1.172 billion, representing an increase of approximately 3-5% over the comparable reported figures of 2022.
The endoscopy segment’s net revenues are projected to be between $37.5 million and $37.8 million, representing an increase of approximately 14-16% over the comparable reported figures of 2022.
Adjusted EPS for 2023 are projected to be within $2.80-$2.89. The Zacks Consensus Estimate for the same stands at $2.82.
Our Take
Merit Medical exited the fourth 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 its Cardiovascular segment and across the majority of its product categories within its Cardiovascular unit. 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. This month, Merit Medical announced that the FDA had granted Breakthrough Device Designation for the SCOUT MD Surgical Guidance System. In November 2022, the company announced the U.S. commercial release of the basixALPHA Inflation Device and the U.S. commercial release of the PreludeSYNC EZ Radial Compression Device. These also look promising for the stock.
However, a decline in the CPS and Endoscopy revenues during the reported quarter is concerning. Rising product costs putting pressure on Merit Medical’s margin, thereby leading to a contraction of both margins, does not look encouraging. The current challenging global macro environment raises our apprehension.
Zacks Rank and Other Key Picks
Merit Medical currently has a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Becton, Dickinson and Company (BDX - Free Report) , popularly known as BD, McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
BD, carrying a Zacks Rank #2, reported first-quarter fiscal 2023 adjusted EPS of $2.98, beating the Zacks Consensus Estimate by 11.6%. Revenues of $4.59 billion outpaced the consensus mark by 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BD has a long-term estimated growth rate of 7.8%. BDX’s earnings surpassed estimates in all the trailing four quarters, the average being 6.5%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.