Back to top

SRDX or HAE: Which is a Better Medical Product Stock?

Read MoreHide Full Article

The Medical Products industry has been gaining prominence in the U.S. healthcare sector, courtesy of R&D innovations, higher consolidation and the recent medical-device tax abatement.

Precisely, the price performance graph of the industry showed a marked improvement year to date, with sturdy performances by two major players — Surmodics, Inc. (SRDX - Free Report) and Haemonetics Corporation (HAE - Free Report) . Though the companies have similar business trends, thorough research into the financials and fundamental factors will help decide which investment option is better.

Detailed Analysis

With a market cap of $496.2 million, Surmodics is a leading provider of medical device and In Vitro Diagnostics (IVD) technologies to the healthcare industry. Haemonetics provides blood-management solutions to customers encompassing blood and plasma collectors, hospitals as well as health care providers, globally. The company has a market cap of about $3.8 billion.

Surmodics and Haemonetics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance: While the companies have outperformed the industry (up 11.5%) over the past year, Haemonetics’ shares have fared better.

Haemonetics’ shares have surged 76.3% in the last 12 months, higher than 63.1% rally of Surmodics.

Earnings Growth Projections: For Surmodics, the Zacks Consensus Estimate for full-year 2018 is pegged at a loss of 5 cents per share, representing year-over-year decline of 109.8%. The stock has long-term expected earnings growth rate of 10%.

For Haemonetics, the Zacks Consensus Estimate is pegged at $1.86 for fiscal 2018, reflecting a year-over-year increase of 21.6%. The stock has long-term expected earnings growth rate of 10.8%.

Haemonetics wins another round.

Sales Growth Projections: For Surmodics, the Zacks Consensus Estimate for sales is pegged at $74.3 million for 2018, reflecting 1.6% rise from the prior year.

For Haemonetics, the consensus estimate for sales is projected at $897.2 million for fiscal 2018, indicating a rise of almost 2% year over year.

Haemonetics has an edge here as well.

What’s Driving Haemonetics?

Haemonetics has been witnessing strong growth in Plasma franchise for quite some time. Plasma consistently witnessed strong growth in the third quarter with 5% rise in revenues at constant currency.

The company is confident about its growth in the market of commercial Plasma collection business. Management raised 2018 guidance for Plasma revenue growth to around 5%, from the previous range of 3-5%. The projection is inclusive of the divestiture of SEBRA bench-top and handheld sealers.

A strong guidance instills investor’s optimism on the stock. Haemonetics expects full-year 2018 revenues to be in line with fiscal 2017 revenues (excluding currency impact of more than 50 bps). The view for Plasma revenue growth has been raised to 5% from previous range of 3-5%.

The outlook for hospital revenue rise has been updated to 6% from the earlier expectation of 7-10%. Blood Center revenues are likely to decline in the 6-7% range, compared with the previous decline of 7-10%.

The company raised its 2018 adjusted EPS guidance to $1.80-$1.90 from the previous band of $1.65-$1.75.

Haemonetics Corporation Price and Consensus

 

Surmodics: A Solid Contender

Surmodics’ performance continues to be driven by its In Vitro Diagnostics (IVD) unit. For over 35 years, the segment has been a leader in developing an ELISA/EIA, immunoblot/western blot line assay or microarray.

Impressive sales of stabilization reagents and molecular diagnostics products primarily benefited the segment. The company plans to continue the development of Surmodics' core medical device coatings and diagnostic reagents businesses.

However,  Surmodics’ flagship SurVeil Drug-Coated Balloons is expected to face stiff competition from MedTech bigshot — Medtronic’s and its admiral IN.PACT platform. Further, weakening U.S. dollar is a headwind. The company reported significant foreign currency losses and operating losses in Ireland.

Surmodics, Inc. Price and Consensus

 

In Conclusion

Our comparative analysis indicates that Haemonetics is positioned well than Surmodics, considering price performance, earnings growth expectations and sales expectations. Further, Haemonetics has a VGM Style Score of B. Notably, the VGM Score is a comprehensive tool that helps investors screen winning stocks from the broader sectors. Further, the score highlights the determining elements in a stock that can drive it higher. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.

Interested in Medical Product Stocks? Check These

Bio-Rad Laboratories, Inc. (BIO - Free Report) pulled off an average positive earnings surprise of 59.2% in the trailing four quarters. The stock sports a Zacks Rank #1.

Abaxis,Inc. (ABAX - Free Report) , a Zacks Rank #2 stock, has a long-term earnings growth rate of 5.1%.

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

Download it free >>



More from Zacks Analyst Blog

You May Like