A month has gone by since the last earnings report for SurModics (SRDX). Shares have added about 21.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is SurModics due for a pullback? 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 catalysts.
Surmodics Q2 Earnings Top Estimates, '24 View Up
Surmodics delivered earnings per share of 7 cents in the second quarter of fiscal 2024 against the year-ago quarter’s loss of 40 cents per share. The metric beat the Zacks Consensus Estimate of a loss of 36 cents per share by 119.4%.
GAAP earnings per share for the quarter was 2 cents, narrower than the year-earlier loss of 55 cents per share.
Revenues in Detail
Surmodics registered revenues of $31.9 million in the fiscal second quarter, up 18% year over year. The figure surpassed the Zacks Consensus Estimate by 11%.
The top line was boosted by solid year-over-year product sales growth from the Medical Device business.
Excluding SurVeil DCB license fee revenues, total revenues increased 19% year over year to $30.9 million.
Segmental Analysis
Surmodics operates via two reportable segments — Medical Device and IVD.
In the reported quarter, sales in the Medical Device segment summed $24.8 million, up 26% from the year-ago quarter. Excluding SurVeil DCB license fee revenues, Medical Device revenues increased 29% to $23.7 million year over year.
Medical Device revenue growth was primarily driven by product sales of $11.1 million, up 40% year over year. Product sales growth was driven primarily by fulfillment of the initial stocking order for the SurVeil DCB from Abbott (Surmodics’ exclusive distribution partner for the product) and continued sales growth from the Pounce thrombectomy device platform.
In the quarter under review, IVD sales declined 5% to $11 million, primarily driven by lower sales of colorimetric substrate products.
The company also derives revenues from three primary sources — Product sales, Royalties and license fees and Research, development and other fees.
In the quarter under review, Product sales were $18.1 million, up 17.9% from the prior-year quarter.
Royalties and license fees revenues totaled $11.4 million, up 21% from the prior-year quarter.
Research, development and other revenues were $2.4 million, up 1.2% year over year.
Margin Trend
In the quarter under review, Surmodics’ gross profit increased 15.8% to $24.9 million. However, the gross margin contracted 120 basis points to 77.7%.
Selling, general & administrative expenses increased 0.9% to $13.1 million. Research and development expenses increased 1% year over year to $8.8 million. Operating expenses, excluding product costs, decreased 14% to $24.2 year over year.
Adjusted operating profit totaled $1.5 million against the prior-year quarter’s adjusted operating loss of $4.4 million.
Financial Position
Surmodics exited second-quarter fiscal 2024 with cash and cash equivalents of $33 million compared with $23.4 million at the end of the fiscal first quarter of 2024. Total long-term debt at the end of second-quarter fiscal 2024 was $29.5 million.
Cumulative net cash used in operating activities at the end of second-quarter fiscal 2024 was $1.4 million compared with $16.6 million a year ago.
Fiscal 2024 Guidance
Surmodics has revised its financial outlook for fiscal 2024.
The company now projects fiscal 2024 revenues in the range of $122 million-$124 million, representing a decrease of 8-6% over the comparable prior-year period. This is raised and tightened from the earlier projection of $117 million-$121 million. The Zacks Consensus Estimate currently stands at $120.6 million.
Excluding SurVeil DCB license fee revenues, Surmodics now expects fiscal 2024 total revenues between $118 million and $120 million, representing an increase of 15-17% compared with fiscal 2023. This is raised and tightened from the prior outlook of revenues between $113 million and $117 million, representing an increase of 10-14% compared to fiscal 2023.
Adjusted loss per share for fiscal 2024 is now expected to be in the range of 47-67 cents. This compares with the earlier provided projections of a loss per share of 87 cents to $1.17. The Zacks Consensus Estimate currently stands at a loss of 90 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -6.9% due to these changes.
VGM Scores
At this time, SurModics has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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, SurModics has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
SurModics belongs to the Zacks Medical - Products industry. Another stock from the same industry, Stryker (SYK), has gained 4.3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
Stryker reported revenues of $5.24 billion in the last reported quarter, representing a year-over-year change of +9.7%. EPS of $2.50 for the same period compares with $2.14 a year ago.
Stryker is expected to post earnings of $2.79 per share for the current quarter, representing a year-over-year change of +9.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.9%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Stryker. Also, the stock has a VGM Score of D.
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