It has been about a month since the last earnings report for SurModics (SRDX). Shares have added about 4% 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 its most recent earnings report in order to get a better handle on the important drivers.
Surmodics Q4 Earnings and Revenues Beat Estimates, Margin Down
Surmodics posted a loss per share of 13 cents in the fourth quarter of fiscal 2024 against the year-ago quarter’s earnings per share of 53 cents. The metric beat the Zacks Consensus Estimate of a loss of 27 cents per share by 51.9%.
GAAP loss per share for the quarter was 24 cents against the year-ago earnings per share of 47 cents.
Revenues in Detail
Revenues of $33.2 million rose 18.8% year over year. The figure surpassed the Zacks Consensus Estimate by 8.3%.
The top line gained from solid year-over-year product sales growth from the Medical Device business, coupled with higher IVD sales.
Segmental Analysis
Surmodics operates via two reportable segments — Medical Device and IVD.
Sales in the Medical Device segment totaled $25.8 million, up 22.4% from the year-ago level. Excluding SurVeil DCB license fee revenues, Medical Device revenues increased 20% to $23.9 million.
The revenue growth in the Medical Device segment was primarily driven by product sales of $11.8 million, which rose 39% year over year, coupled with an increase in performance coating royalties and license fee revenues.
Product sales growth was driven primarily by growth in sales of the Pounce thrombectomy device platform, commercial shipments of the SurVeil DCB to Abbott (Surmodics’ exclusive distribution partner for the product), and sales growth of performance coating reagents.
IVD sales improved 7.9% to $7.5 million, primarily driven by growth in sales of distributed antigen products and microarray slide/surface products.
The company also records revenues under three primary sources — Product sales, Royalties and license fees and Research, development and other fees.
In the quarter under review, Product sales amounted to $19.1 million, up 24.3% from the prior-year level.
Royalties and license fees revenues totaled $11.4 million, up 13.8% from the prior-year figure.
Research, development and other revenues amounted to $2.7 million, up 5% year over year.
Margin Trend
In the quarter under review, Surmodics’ gross profit increased 17.7% to $24.6 million. However, the gross margin contracted 50 basis points to 74.1%.
SG&A expenses increased 13.8% to $14.6 million. R&D expenses remained flat year over year at $9.7 million. Operating expenses, excluding product costs, increased 7.7% to $25.2 million.
Adjusted operating profit totaled $1.1 million, up 3.4% year over year.
Financial Position
Surmodics exited fourth-quarter fiscal 2024 with cash and cash equivalents of $36.1 million compared with $38.2 million at the end of the fiscal third quarter of 2024. Total long-term debt at the end of the fourth quarter was $29.6 million.
Net cash provided by operating activities at the end of the reported quarter was $0.2 million compared with $10.5 million a year ago.
Pending Acquisition Update
Surmodics did not provide any financial outlook for fiscal 2025 in light of the pending acquisition by GTCR, a leading private equity firm.
SRDX entered into a definitive agreement to be acquired by GTCR in May and the merger was approved by SRDX’s shareholders in August. The deal is expected to be completed by March 31, 2025, following which SRDX will become a privately held company.
How Have Estimates Been Moving Since Then?
Estimates revision followed an upward path over the past two months.
VGM Scores
Currently, SurModics has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
SurModics has a Zacks Rank #2 (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, Boston Scientific (BSX), has gained 4.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Boston Scientific reported revenues of $4.21 billion in the last reported quarter, representing a year-over-year change of +19.3%. EPS of $0.63 for the same period compares with $0.50 a year ago.
Boston Scientific is expected to post earnings of $0.65 per share for the current quarter, representing a year-over-year change of +18.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +0%.
Boston Scientific has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Surmodics, Inc. (SRDX) : Free Stock Analysis Report
Boston Scientific Corporation (BSX) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
