Merit Medical Systems, Inc. (MMSI - Free Report) is well poised for growth backed by strengthening product pipeline, solid research and development (R&D) focus, and prudent buyouts. However, intense competition in the MedTech space remains a concern.
Shares of Merit Medical have lost 53.1%, compared with the industry’s decline of 27.3% in a year’s time. Meanwhile, the S&P 500 Index has fallen 18.2% in the same timeframe.
The company, with a market capitalization of $1.55 billion, provides various peripheral and cardiac intervention products to cure cardiac conditions specific to interventional cardiology and electrophysiology. It anticipates earnings to improve 11.1% over the next five years.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
The medical products industry is highly competitive. Merit Medical competes globally in several market areas, which includes diagnostic and interventional cardiology, interventional radiology, neurointerventional radiology, vascular and general and thoracic surgery. Consequently, intense competition continues to plague the stock.
What’s Favoring the Stock?
Merit Medical has gained significant momentum on the back of new products and remains optimistic regarding the product pipeline, including radio and electrophysiology products, going forward.
The company expects to launch its significant Aspira pleural drainage, pleural effusion and peritoneal drainage products between second and third-quarter 2020 in Europe, Canada, Australia and other locations. Another important product – Surfacer – is a device in which the company has an equity interest in.
It is important to note here that the company will move 14 new products from Salt Lake City and one or two other facilities to either Texas or Mexico. This transfer process will be done in 2020. Following this, an annual basis, the company anticipates savings to range between $6 million and $10 million a year.
Further, the company’s strong focus in research and development (R&D) is a positive. The company’s strong commitment to innovation led to the introduction of several new products, improvements in the existing products and expansion of product lines and enhancements and new equipment in the R&D facilities. In the fourth quarter, research and development expenses amounted to $16.2 million, up 5.8% year over year.
Moreover, Merit Medical has been leveraging on bolt-on buyouts to drive inorganic growth. The company remains optimistic about Merit Medical’s Becton Dickinson deal, the acquisitions of Cianna Medical and Vascular Insights, and the execution of the global growth and profitability plan.
Which Way Are Estimates Headed?
For 2020, the Zacks Consensus Estimate for revenues is pegged at $1.03 billion, indicating an improvement of 3.5% from the prior-year period. The same for earnings stands at $1.56 per share, suggesting growth of 6.9% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space include Accuray Incorporated (ARAY - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and The Cooper Companies, Inc. (COO - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Accuray has an expected earnings growth rate of 200% for third-quarter fiscal 2020.
West Pharmaceutical has an estimated earnings growth rate of 3.4% for first-quarter 2020.
Cooper Companies has a projected long-term earnings growth rate of 10.8%.
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