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SurModics (SRDX) Down 37.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for SurModics (SRDX - Free Report) . Shares have lost about 37.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is SurModics due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Surmodics Q1 Earnings Top Estimates, FY23 View Revised

Surmodics delivered an adjusted loss per share of 50 cents in the first quarter of fiscal 2023, which is wider than the year-ago quarter’s loss of 13 cents per share. However, the figure was narrower than the Zacks Consensus Estimate of a loss of 64 cents per share.

Our projection of loss per share was 64 cents, in line with the Zacks Consensus Estimate.

GAAP loss per share for the quarter was 56 cents, wider than the year-earlier loss of 20 cents per share.

Revenues in Detail

Surmodics registered revenues of $24.9 million in the fiscal first quarter, up 8.4% year over year. The figure surpassed the Zacks Consensus Estimate by 3.1%.

The fiscal first-quarter revenue compares to our estimate of $24.4 million.

The top line was boosted by solid year-over-year product sales growth from the Medical Device business. However, this was partially offset by a decrease in Surmodics’ IVD revenues.

Segmental Analysis

Surmodics operates via two reportable segments — Medical Device and IVD.

In the reported quarter, sales at the Medical Device segment summed $19 million, up 12.5% from the year-ago quarter. Per management, strong sales of Surmodics’ performance coating reagents and device products, including important contributions from sales of the company’s Pounce and Sublime products, significantly drove the segment. The company also saw higher royalty and license fee revenue.

This figure compares to our Medical Device fiscal first-quarter revenue projection of $17.7 million.

In the quarter under review, IVD sales declined by 2.9% to $5.9 million, primarily resulting from the completion of a customer development program.

This figure compares to our IVD fiscal first-quarter revenue projection of $6.7 million.

The company also derives revenues from three primary sources — Product sales, Royalties and license fees, and Research, development and other fees.

In the quarter under review, Product sales were $14.2 million, up 15.3% from the prior-year quarter. Royalties and license fees revenues totaled $8.8 million, up 8.2% from the prior-year quarter. Research, development and other revenues were $1.9 million, down 24.5% year over year.

Margin Trend

In the quarter under review, Surmodics’ gross profit rose 6.3% to $19.7 million. Gross margin contracted 157 basis points to 78.9%.

Selling, general & administrative expenses rose 43.9% to $13.2 million. R&D expenses went up 9.3% year over year to $12.7 million. Adjusted operating expenses of $25.9 million rose 24.6% year over year.

Adjusted operating loss totaled $6.3 million compared with the prior-year quarter’s adjusted operating loss of $2.4 million.

Financial Position

Surmodics exited first-quarter fiscal 2023 with cash and cash equivalents of $26.4 million compared with $18.9 million at the end of fiscal 2022. The company ended first-quarter fiscal 2023 with total debt of $29.5 million compared with $10 million at the end of fiscal 2022.

Net cash used in operating activities at the end of first-quarter fiscal 2023 was $10.8 million compared with net cash used in operating activities of $7 million a year ago.

Fiscal 2023 Guidance

Surmodics has revised its full-year financial outlook.

The company now projects fiscal year revenues to be within the range of $102 million-$106 million, representing an increase of 2-6% over the comparable prior-year period. This is lower than the previous outlook of $103 million-$107 million, reflecting an uptick of 3-7% over the comparable prior-year period. The Zacks Consensus Estimate for the same is currently pegged at $105.3 million.

Adjusted diluted loss per share for fiscal 2023 is now expected within the range of $2.09-$1.69 compared with the prior outlook of adjusted diluted loss per share of $2.54-$2.14. The Zacks Consensus Estimate for the same is currently pegged at a loss of $2.35 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 14.16% due to these changes.

VGM Scores

At this time, SurModics has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, SurModics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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