Merit Medical (MMSI) Down 24.4% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Merit Medical (MMSI). Shares have lost about 24.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Merit Medical 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 drivers.

Merit Medical Q4 Earnings & Revenues Beat Estimates

Merit Medical Systems, Inc. reported fourth-quarter 2019 adjusted earnings per share of 40 cents, which beat the Zacks Consensus Estimate of 34 cents by 17.6%. However, the bottom line declined 16.7% from the year-ago quarter.

For the full year, adjusted EPS was $1.46, down 13.6% from that of 2018. However, the figure outpaced the consensus mark by 3.5%.

Revenues in Detail

This Utah-based provider of peripheral and cardiac intervention products reported worldwide revenues of $257.9 million, up 10.6% from the year-ago quarter. On a comparable constant-currency basis, the figure improved 8.5% year over year. Moreover, the top line surpassed the Zacks Consensus Estimate of $252.3 million by 2.2%.

For the full year, the company reported worldwide revenues worth $994.9 million, which improved 12.7% from the previous year. The top line beat the Zacks Consensus Estimate by 0.6%.

Segmental Analysis

Cardiovascular

The Cardiovascular unit reported fourth-quarter revenues of $249.4 million, up 10.8% year over year. The upside can be attributed to year-over-year increase of 11.9% in the segment’s Stand-alone devices to $106.2 million. Further, revenues from Catheters improved 8.1% to $45.1 million. Moreover, Embolization devices climbed 12.7% to $13.9 million.

Moreover, revenues at the CRM/EP unit increased 7.9% to $13.7 million. Further, revenues from Custom kits and procedure trays unit, under the Cardiovascular segment, inched up 0.6% to $34.6 million. Inflation devices revenues declined 2.8% on a year-over-year basis at $22.2 million.

Endoscopy Devices

Revenues from the Endoscopy devices totaled $257.9 million, up 10.6% year over year.

Margins

In the quarter under review, gross profit totaled $111.6 million, up 6.7% on a year-over-year basis. Gross margin came in at 43.3% of net revenues, down 160 bps year over year. Adjusted gross margins contracted 110 bps on a year-over-year basis to 48.3% of net revenues.

Merit Medical registered selling, general and administrative expenses totaled $82.1 million, up 8.5% year over year.

Meanwhile, research and development expenses amounted to $16.2 million, up 5.8% year over year.

Operating loss in the quarter totaled $3.4 million, against the year-ago quarter’s operating income of $13.7 million.

Financial Update

Cash and cash equivalents came in at $44.3 million, down 34.2% from the year-ago quarter.

As of Dec 31, 2019, total assets came in at $1.76 billion, up 8.5% from $1.62 billion at 2018 year end.

2020 Guidance

For 2020, the company projects revenues in the range of $1.04-1.06 billion. The Zacks Consensus Estimate for the same is pegged at $1.05 billion.

Adjusted earnings per share is anticipated between $1.58 and $1.68. The consensus mark for the metric is pegged at $1.56 per share.

Adjusted operating margin is estimated between 13% and 14%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -18.81% due to these changes.

VGM Scores

At this time, Merit Medical has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Merit Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.