Surmodics, Inc.
SRDX
is well-poised for growth in the coming quarters, courtesy of its solid prospects in the thrombectomy business over the past few months. The optimism led by a solid fourth-quarter fiscal 2022 performance and consistent efforts to boost research and development (R&D) are expected to contribute further. Yet, concerns related to regulatory headwinds and data security threats persist.
Over the past year, this Zacks Rank #3 (Hold) stock has lost 30.1% compared with 44.6% decline of the
industry
and 20.5% fall of the S&P 500 composite.
The renowned medical device and in-vitro diagnostics technology provider has a market capitalization of $475.8 million. Surmodics projects 58.7% growth for fiscal 2024, expecting to maintain its strong performance. SRDX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average earnings surprise being 34.9%.
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Let’s delve deeper.
Consistent Efforts to Boost R&D:
Surmodics’ solid efforts to improve its R&D stature have been a key growth driver, which raises our optimism. The company’s whole product solutions pipeline and sirolimus-based below-the-knee drug-coated balloon (DCB) program deserve a mention. Surmodics has been making progress using its internally developed .014 balloon platform.
During its fiscal 2022 fourth-quarter earnings call in November, Surmodics confirmed that it witnessed an uptick in its R&D expense. This was primarily driven by increased product development investments in the company’s Pounce and Sublime product portfolios.
Thrombectomy Prospects Bright:
Surmodics’ aim to leverage its proprietary Pounce thrombectomy platform technology to develop products raises our optimism. During its fiscal 2022 fourth-quarter earnings call, Surmodics confirmed that the solid performance of its Medical Device business in the quarter exceeded management’s expectations. It was driven by a combination of stronger-than-anticipated product sales, including sales of Surmodics’ Pounce and Sublime products, along with higher-than-anticipated license refi revenue related to its SurVeil agreement.
Strong Q4 Results:
Surmodics’ better-than-expected earnings in fourth-quarter fiscal 2022 buoy optimism about the stock. The company registered robust revenues from its Medical Device segment, as well as from its Product sales, and royalties and license fees. Surmodics’ progress with respect to the initial commercialization of its Pounce arterial thrombectomy, SurVeil DCB and Sublime radial platforms is promising.
Downsides
Regulatory Headwinds:
Surmodics’ products and business activities are subject to complex regulations worldwide. However, failing to comply with these legal and regulatory requirements could impact the company’s business. Surmodics anticipates that governmental authorities will continue to scrutinize the industry it operates closely, and those additional regulations may increase compliance and legal costs.
Data Security Threats:
Surmodics collects and stores sensitive data, including its proprietary business information, on its networks. The secure maintenance of this information is critical to its operations and business strategy. Despite Surmodics’ security measures, its information technology and infrastructure may be vulnerable to attacks by hackers resulting from employee error, malfeasance or other disruptions.
Estimate Trend
Surmodics is witnessing a negative estimate revision trend for fiscal 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved from earnings of 38 cents to a loss of $2.37 per share.
The Zacks Consensus Estimate for the company’s first-quarter fiscal 2023 revenues is pegged at $24.9 million, suggesting an 8.2% improvement from the year-ago reported number.
This compares to our first-quarter 2023 revenue estimate of $24.4 million, suggesting a 6.1% improvement from the year-ago quarter’s reported number.
Key Picks
Some better-ranked stocks in the broader medical space are
Exact Sciences Corporation
EXAS
,
ShockWave Medical, Inc.
SWAV
and
Merit Medical Systems, Inc.
MMSI
.
Exact Sciences, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 27.5%. EXAS’ earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, the average beat being 0.6%.
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Exact Sciences has lost 35.8% compared with the
industry
’s 21.2% decline in the past year.
ShockWave Medical, carrying a Zacks Rank #2 at present, has an estimated growth rate of 22.2% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 146.1%.
ShockWave Medical has gained 16.4% against the
industry
’s 27.6% decline over the past year.
Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 13.7% against the
industry
’s 12.1% decline over the past year.
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