Surmodics, Inc. SRDX reported adjusted earnings per share (EPS) of 12 cents in first-quarter fiscal 2019, comparing favorably with the Zacks Consensus Estimate of a loss of a penny. Earnings rose 20% from the year-ago quarter’s figure.
Revenues in the quarter increased 30.7% to $22.2 million, which outpaced the Zacks Consensus Estimate by 17.7%.
Meanwhile, over the past year, shares of the Zacks Rank #2 (Buy) company have rallied 77.5% against the industry’s 6.3% and the S&P 500 index’s 6.5% declines.
Q1 Highlights
In the quarter under review, Product sales were $9.8 million, up 20.6% year over year. Royalty and license fee revenues totaled $10.1 million, up 42.7% from the year-ago quarter. Research, development and other revenues were $2.4 million, up 29.5% year over year.
In the reported quarter, first patient was treated for the first study of the Avess arteriovenous (AV) access drug coated balloon (DCB). Additionally, the enrollment under Surmodics’ TRANSCEND clinical trial continued in the quarter.
Surmodics, Inc. Price, Consensus and EPS Surprise
Surmodics, Inc. Price, Consensus and EPS Surprise | Surmodics, Inc. Quote
Segmental Analysis
Medical Device
In the reported quarter, sales at the segment rose 35.1% to $17.3 million, which includes $2.4 million from the SurVeil agreement with Abbott ABT. Per management, the uptick can be attributed to an increase in balloon catheter unit volume as a result of recent product launches.
The Medical Device business unit also reported $0.4 million of operating income in the first quarter against an operating loss of $0.4 million a year ago.
IVD
In the quarter under review, sales increased 17.6% to $5 million, reflecting strong growth in sales of the company’s clinical components used in diagnostic tests and microarray slides slide.
Operating income at the segment was $2.5 million in the reported quarter, up 47% from the year-ago quarter’s level.
Operating Details
Surmodics registered Product costs of $3.5 million in the quarter, up 21.9% year over year.
The company had research and development costs of $11.5 million, up 46.7% year over year.
Selling, general and administrative expenditures were almost $5.9 million, up 14.7% from the prior-year quarter.
Total operating costs and expenses in the quarter were $21.5 million, up 22% year over year.
Guidance
Surmodics raised the low end of its fiscal 2019 revenue expectation to $94 million from $92 million, while the high end is maintained at $97 million. The Zacks Consensus Estimate is pegged at $93.3 million, below the guided range.
Adjusted EPS is projected between 2 cents and 22 cents, compared with the previous projection of a loss of 7 cents to EPS of 23 cents. The Zacks Consensus Estimate is pinned at EPS of 8 cents, within the guided range.
Conclusion
Surmodics exited the fiscal first quarter on a strong note, with EPS and revenues outpacing estimates. The company continues to gain from its core Medical Devices unit which saw significant contribution from the SurVeil agreement with Abbott in the quarter. In fact, management expects the segment to see double-digit revenues growth in fiscal 2019. Strong sales of the company’s clinical components drove the IVD segment. Management is also optimistic about the ongoing TRANSCEND enrollment. Additionally, the company expects a CE mark for SurVeil in Europe in the near future. A strong guidance for fiscal 2019 buoys optimism.
On the flip side, surging operating expenses is a concern. Additionally, unfavorable foreign currency movement impacted the company’s bottom line in the fiscal first quarter. Surmodics’ drug-coated balloons face stiff competition in the niche space.
Earnings of Other MedTech Majors at a Glance
Other top-ranked MedTech stocks which posted solid results this earnings season are Varian Medical Systems VAR and AngioDynamics ANGO.
Varian’s fiscal first-quarter adjusted EPS of $1.06 was in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2.
AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents beat the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, surpassing the consensus estimate by 2.9%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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