Merit Medical Systems, Inc. MMSI is well-poised for growth in the coming quarters, courtesy of its strong product portfolio. The optimism, led by a solid third-quarter 2024 performance and its continued spending on research and development (R&D), is expected to contribute further. However, headwinds due to higher consolidation in the healthcare industry and forex volatility persist.
This Zacks Rank #2 (Buy) company’s shares have risen 12.7% in the past six months compared with the industry’s 1.7% gain. The S&P 500 has risen 6.4% during the same time frame.
The renowned medical device provider has a market capitalization of $5.64 billion. The company projects 12% growth for the next five years and expects to maintain its strong performance going forward. It delivered an average earnings surprise of 6.42% for the past four quarters.
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Let’s delve deeper.
Strong Q3 Results: Merit Medical’s robust third-quarter 2024 results buoy optimism. The company witnessed a year-over-year uptick in the top and bottom lines. It also saw revenue growth in both its segments and across the majority of the product categories within its Cardiovascular unit. Robust performance in the United States and outside was registered. The expansion of gross margins bodes well.
Strong Product Portfolio: Merit Medical has continued to gain significant momentum due to new products added through launches and acquisitions. Last month, MMSI announced the FDA's premarket approval for the WRAPSODY Cell-Impermeable Endoprosthesis. With this approval, MMSI can begin commercializing the device in the United States in 2025.
During the third quarter, MMSI completed the purchase of Cook Medical’s lead management portfolio, including a comprehensive set of solutions to support cardiac intervention patients, ranging from diagnosis to post-procedure care.In July, the company expanded its offerings by acquiring assets from EndoGastric Solutions, adding the EsophyX Z+ device to its endoscopy portfolio.
In May, the company announced the U.S. commercial release of the basixSKY Inflation Device. The same month, Merit Medical received the FDA’s 510(k) clearance for its Siege Vascular Plug. The company also announced the launch of its Bearing nsPVA Express Prefilled Syringe in the United States and Australia.
Continued Spending on R&D:Merit Medical’s R&D operations have been central to its historical growth and are believed to be critical to its continued growth. In recent years, the company’s focus on innovation has led to the introduction of several new products, improvements in its existing products, expansion of its product lines, as well as enhancements and new equipment in its R&D facilities. This raises our optimism.R&D expenses rose 4.5% year over year to $20.5 million.
Downsides
Higher Consolidation in the Healthcare Industry:Healthcare costs have surged considerably over the past decade. In response, large-cap MedTech giants have begun consolidating with mid-cap and small-cap companies to offer more affordable solutions and reduce competition. This trend has reduced the cost of healthcare products.
According to management, such industry dynamics have led Merit Medical’s customers to demand price concessions, challenging its existing business strategies. This could exert significant downward pressure on the pricing of Merit Medical’s products, potentially affecting its customer base.
Forex Volatility:Merit Medical’s operations outside the United States have increasingly exposed it to market risks related to foreign currency, which could have a negative impact on its margins and financial results. If the rate of exchange between foreign currencies declines against the U.S. dollar, Merit Medical may not be able to increase the prices of its products in foreign countries. Third-quarter sales reflected an unfavorable impact of 10 basis points due to forex movement.
Estimate Trend
MMSI is witnessing a positive estimate revision trend for 2025. In the past 60 days, the Zacks Consensus Estimate for its earnings per share (EPS) has moved north 2 cents to $3.73.
The Zacks Consensus Estimate for the company’s first-quarter 2025 revenues is pegged at $352.1 million, suggesting an 8.8% rise from the year-ago reported number. The consensus mark for EPS is pegged at 83 cents, implying a 7.8% improvement from the prior-year reported figure.
Merit Medical Systems, Inc. Price
Merit Medical Systems, Inc. Price
Merit Medical Systems, Inc. price | Merit Medical Systems, Inc. Quote
Other Stocks to Consider
Some other top-ranked stocks in the broader medical space are Masimo MASI, Accuray ARAY and Abbott Laboratories ABT.
Masimo, carrying a Zacks Rank #2 at present, has an estimated growth rate of 11.8% for 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Its shares have risen 44.8% compared with the industry’s 0.1% growth in the past six months.
Accuray, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1200% for 2025. Its earnings missed estimates in three of the trailing four quarters and met in one, delivering an average negative surprise of 141.97%.
ARAY’s shares have gained 14.4% compared with the industry’s 0.1% growth in the past six months.
Abbott, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 10% for 2025. It delivered a trailing four-quarter average earnings surprise of 1.64%.
ABT’s shares have risen 10.6% in the past six months compared with the industry’s 8.7% growth.
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