Merit Medical Systems, Inc. MMSI reported adjusted earnings per share (EPS) of 18 cents, beating the Zacks Consensus Estimate of 15 cents. Adjusted EPS also surged 50% on a year-over-year basis.
Merit Medical Systems Inc. - Earnings Surprise | FindTheCompany
Quarter Details
Net sales increased 9% (11% at constant currency) to $129.6 million, outpacing the Zacks Consensus Estimate of $126 million.
The increase in net sales can be attributed to the increase in sales of Endotek (up 11% on a year-over-year basis), custom kit and tray (up 10%), BioSphere (up 9%), inflation device (up 8%) and stand-alone device (up 7%). However, Malvern sales fell 10% from the year-ago quarter.
Adjusted gross margin contracted 110 basis points (bps) on a year-over-year basis to 44.9%. The contraction can be attributed to higher average fixed overhead unit costs and sales discounts provided to various international distributors. However, these negatives were partially offset by a decline in Merit Medical's manufacturing operating costs and raw materials.
Adjusted selling, general and administrative (SG&A) expenses, as percentage of net sales, contracted 250 bps to 27.5%. The contraction was a result of increased sales coupled with a decline in Merit Medical's Euro-based SG&A expenses. Meanwhile, adjusted research and development (R&D) expenses, as percentage of sales, increased 10 bps.
Adjusted operating margin expanded 120 bps to 9.9%. The expansion is primarily due to higher net sales and lower operating expenses, as percentage of sales.
Liquidity
Cash and cash equivalents, as of Mar 31, 2015, was $9.9 million, compared with $7.4 million, as of Dec 31, 2014. Long-term debt, as of Mar 31, was $202.9 million, compared with $214.5 million at the end of the last quarter.
Product Pipeline/ New Facilities
Merit Medical is looking to roll out its new product – Prelude Snap – by next month. The product has won both the CE mark and FDA approval and is expected to be a significant addition to Merit Medical’s vascular access product portfolio. Management is also set to unveil the Corvocet Biopsy system this year, which has already received positive trial reviews from physicians.
Merit Medical is also on schedule to open its new facility in Mexico, with production expected to begin in the third quarter of 2015. The company has also completed its logistics and customer service facilities in the Netherlands, which is expected to drive growth in Europe, the Middle East and Asia.
Our Take
We are impressed with Merit Medical’s first-quarter 2015 results. The company managed to beat the Zacks Consensus Estimate on both the top and the bottom line, in spite of lingering geopolitical tensions and unfavorable currency fluctuations.
We are also upbeat on Merit Medical’s robust sales force in the U.S., which increased by 9.2% during the first quarter of 2015. Growth in international markets, especially China, continues to be a strong point for the company. We are also encouraged by a healthy and promising product pipeline that is expected to drive significant growth, going forward.
Zacks Rank
Currently, Merit Medical has a Zacks Rank #1 (Strong Buy). Other stocks in the medical sector, that warrant a look, are LeMaitre Vascular LMAT, SurModics SRDX and Capricor Therapeutics CAPR. While LeMaitre Vascular and SurModics sport a Zacks Rank #1 (Strong Buy), Capricor Therapeutics holds a Zacks Rank #2 (Buy).
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