Merit Medical Systems, Inc. (MMSI Quick QuoteMMSI - Free Report) is well-poised for growth in the coming quarters, backed by its strong product portfolio. A solid first-quarter 2022 performance, along with its solid international exposure, is expected to contribute further.

However, headwinds related to stiff competition, and the lack of direct sales and marketing capabilities persist.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 3.6% against a 2.8% fall of the industry and a 1.9% decline of the S&P 500.

The renowned medical devices provider has a market capitalization of $3.54 billion. The company projects 10.5% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 28.5% for the past four quarters, on average.

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Let’s delve deeper.

Strong Q1 Results: Merit Medical’s robust first-quarter 2022 results buoy optimism. The company saw revenue growth in its Cardiovascular and Endoscopy segments, as well as all product categories within its Cardiovascular unit. Solid product sales are also promising. Robust performances in the United States and outside are impressive. Strong execution and improving customer demand trends raised the overall top line, which is encouraging.

The company stands to benefit from the execution of its global growth and profitability plan. The expansion of the adjusted operating margin also bodes well.

Strong Product Portfolio: We are upbeat about Merit Medical’s continued gains on the back of significant momentum of new products. We are also optimistic about the company’s product pipeline, including radio and electrophysiology products.

The company, in April, launched the ReSolve Thoracostomy Tray, which has all products needed for performing a thoracostomy — a minimally-invasive technique that enables patients to opt out of an open surgical procedure to drain chest fluids or air.

International Exposure: We are upbeat about Merit Medical’s current global operations, including its territories in Europe, the Middle East, Africa, Asia, Oceania, Central and South America, Mexico, and Canada. In the first quarter of 2022, Merit Medical confirmed that its international sales (44.5% of net sales) improved 13.8% from the corresponding period of 2021. This included increased sales of 18.1% in APAC operations, 46.1% in Rest of the World operations and 5% in EMEA operations.

Downsides

Stiff Competition: Merit Medical operates in highly competitive markets. It faces competition from many companies that are larger and possess a greater market presence and resources than Merit Medical.
The company competes globally in several markets, including radiology, diagnostics and interventional cardiology. Such resources and market presence may enable MMSI’s competitors to market competing products more efficiently or at reduced prices in order to gain market share.

Lack of Direct Sales and Marketing Capabilities: Merit Medical lacks direct sales and marketing capabilities in many countries. The company wholly depends on third-party distributors for the commercialization of products in countries like China, Japan, Russia and India. Per management, because of inefficiencies in the distributor base, Merit Medical often fails to successfully commercialize its products in these countries.

Estimate Trend

Merit Medical is witnessing a positive estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 0.4% north to $2.50.

The Zacks Consensus Estimate for the company’s second-quarter 2022 revenues is pegged at $280.9 million, suggesting a 0.2% rise from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN Quick QuoteAMN - Free Report) , Veeva Systems Inc. (VEEV Quick QuoteVEEV - Free Report) and Masimo Corporation (MASI Quick QuoteMASI - Free Report) .

AMN Healthcare, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 1.1%. AMN’s earnings surpassed estimates in all the trailing four quarters, the average beat being 15.6%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has gained 7.8% against the industry’s 63.2% fall in the past year.

Veeva Systems has an estimated long-term growth rate of 18.1%. VEEV’s earnings surpassed estimates in the trailing four quarters, the average beat being 9.6%. It currently carries a Zacks Rank #2 (Buy).

Veeva Systems has lost 40.9% compared with the industry’s 57.3% fall over the past year.

Masimo, carrying a Zacks Rank #2 at present, has an earnings yield of 3.2% against the industry’s negative yield. MASI’s earnings surpassed estimates in the trailing four quarters, the average beat being 4.4%.

Masimo has lost 33.4% compared with the industry’s 14.8% fall over the past year.