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Surmodics (SRDX) Beats on Q3 Earnings, Revises FY22 View
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Surmodics, Inc. (SRDX - Free Report) delivered an adjusted loss per share of 34 cents for the fiscal third quarter of 2022, in contrast to the year-ago quarter’s adjusted earnings per share (“EPS”) of 17 cents. However, the figure was narrower than the Zacks Consensus Estimate of a loss of 39 cents per share.
GAAP loss per share for the quarter was 41 cents, wider than the year-ago loss of 24 cents per share.
Revenues in Detail
Surmodics registered revenues of $24.9 million in the fiscal third quarter, up 4.2% year over year. However, the figure missed the Zacks Consensus Estimate by 2.3%.
On a sequential basis, the top line declined 4.6%.
The top line was in line with management expectations, driven by product sales growth from both the Medical Device and In-Vitro Diagnostics (“IVD”) businesses.
Surmodics operates via two reportable segments — Medical Device and IVD.
In the reported quarter, sales at the Medical Device segment were $17.5 million, up 5% from the year-ago quarter. The growth in revenues was driven by strong product sales.
In the quarter under review, IVD sales improved 3% to $7.3 million on the back of strong product sales, partially offset by lower research & development revenues.
The company reports consolidated revenues of its two segments under three categories — Product sales, Royalties and license fees, and Research, development and other fees.
In the quarter under review, Product sales were $13.9 million, up 15.2% from the prior-year quarter. Royalties and license fees revenues totaled $8.8 million, flat year over year. Research, development and other revenues were $2.1 million, down 28.5% year over year.
Margin Trend
In the quarter under review, Surmodics’ gross profit (profit after excluding only Product costs of $5.1 million from total revenues) rose 4.8% to $19.7 million. The gross margin expanded 40 basis points (bps) to 79.1%.
Selling, general & administrative expenses rose 63.1% to $13 million. Research and development expenses went up 6% year over year to $13 million. Adjusted operating expenses of $24.8 million rose 19.5% year over year.
Adjusted operating loss totaled $3.8 million against the prior-year quarter’s adjusted operating income of $10 million.
Financial Position
Surmodics exited the third quarter of fiscal 2022 with cash and cash equivalents of $22.1 million compared with $24.7 million at the end of the second quarter of fiscal 2022. The company had $10 million in debt, solely short-term borrowing, by the end of the third quarter compared to no debt on its balance sheet in the prior quarter.
Cumulative net cash used in operating activities at the end of the fiscal third quarter was $14.7 million against net cash provided by operating activities of $14.5 million a year ago.
Fiscal 2022 Guidance
Surmodics lowered its full-year revenue outlook to $97 million-$99 million from $98 million-$101 million in anticipation of softness in customer demand. The Zacks Consensus Estimate for the same is currently pegged at $100.7 million.
The company, however, favorably revised the upper end of its guidance for earnings on the back of solid performance in the first half of 2022 and continued investments to accelerate its strategy.
Adjusted loss per share for fiscal 2022 is now expected within the range of $1.35-$1.50, compared with the earlier-provided projection of a loss of $1.35-$1.70. The Zacks Consensus Estimate for the same is currently pegged at a loss of $1.15 per share.
Our Take
Surmodics exited the third quarter of fiscal 2022 with revenues in line with management expectations. The company registered robust Product sales on the back on continued demand for its medical devices and IVD products.
Surmodics confirmed making crucial progress on its SurVeil drug-coated balloon (DCB) premarket approval submission. The company is likely to record $27-30 million in milestone payments in fiscal 2022 or 2023 following anticipated approval for SurVeil DCB. Strong potential in the company’s Sublime Radial Access device and Pounce Arterial Thrombectomy platform raise our optimism about the company.
However, the company’s revenues missed estimates, indicating a potential softness in the targeted market. But we are encouraged by the company’s strategies that have resulted in the improved margin, which is likely to continue in the second half of 2022.
Surmodics’ shares have declined 25.6% so far this year compared with the industry’s decrease of 25.2%.
Image Source: Zacks Investment Research
Zacks Rank and Other Key Picks
Currently, Surmodics carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the pharma/biotech sector include Lantheus , ShockWave Medical and Alkermes (ALKS - Free Report) . While Lantheus and ShockWave Medical sport a Zacks Rank #1 (Strong Buy), Alkermes carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for Lantheus have improved from earnings of $3.04 to $3.08 for 2022 and $3.33 to $3.62 for 2023 in the past 30 days. LNTH has surged 156.6% so far this year.
Lantheus delivered an earnings surprise of 77.82%, on average, in the last four quarters.
ShockWave Medical’s earnings per share estimates have improved from $1.84 to $2.02 for 2022 and from $2.82 to $2.95 for 2023 in the past 30 days. SWAV has declined 19.1% so far this year.
ShockWave Medical delivered an earnings surprise of 189.99%, on average, in the last four quarters.
Alkermes’ earnings per share estimates have improved from breakeven to 4 cents for 2022 and from 56 cents to 59 cents for 2023 in the past 30 days. ALKS has gained 19.6% so far this year.
Alkermes delivered an earnings surprise of 350.48%, on average, in the last four quarters.
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Surmodics (SRDX) Beats on Q3 Earnings, Revises FY22 View
Surmodics, Inc. (SRDX - Free Report) delivered an adjusted loss per share of 34 cents for the fiscal third quarter of 2022, in contrast to the year-ago quarter’s adjusted earnings per share (“EPS”) of 17 cents. However, the figure was narrower than the Zacks Consensus Estimate of a loss of 39 cents per share.
GAAP loss per share for the quarter was 41 cents, wider than the year-ago loss of 24 cents per share.
Revenues in Detail
Surmodics registered revenues of $24.9 million in the fiscal third quarter, up 4.2% year over year. However, the figure missed the Zacks Consensus Estimate by 2.3%.
On a sequential basis, the top line declined 4.6%.
The top line was in line with management expectations, driven by product sales growth from both the Medical Device and In-Vitro Diagnostics (“IVD”) businesses.
Surmodics, Inc. Price, Consensus and EPS Surprise
Surmodics, Inc. price-consensus-eps-surprise-chart | Surmodics, Inc. Quote
Segmental Analysis
Surmodics operates via two reportable segments — Medical Device and IVD.
In the reported quarter, sales at the Medical Device segment were $17.5 million, up 5% from the year-ago quarter. The growth in revenues was driven by strong product sales.
In the quarter under review, IVD sales improved 3% to $7.3 million on the back of strong product sales, partially offset by lower research & development revenues.
The company reports consolidated revenues of its two segments under three categories — Product sales, Royalties and license fees, and Research, development and other fees.
In the quarter under review, Product sales were $13.9 million, up 15.2% from the prior-year quarter. Royalties and license fees revenues totaled $8.8 million, flat year over year. Research, development and other revenues were $2.1 million, down 28.5% year over year.
Margin Trend
In the quarter under review, Surmodics’ gross profit (profit after excluding only Product costs of $5.1 million from total revenues) rose 4.8% to $19.7 million. The gross margin expanded 40 basis points (bps) to 79.1%.
Selling, general & administrative expenses rose 63.1% to $13 million. Research and development expenses went up 6% year over year to $13 million. Adjusted operating expenses of $24.8 million rose 19.5% year over year.
Adjusted operating loss totaled $3.8 million against the prior-year quarter’s adjusted operating income of $10 million.
Financial Position
Surmodics exited the third quarter of fiscal 2022 with cash and cash equivalents of $22.1 million compared with $24.7 million at the end of the second quarter of fiscal 2022. The company had $10 million in debt, solely short-term borrowing, by the end of the third quarter compared to no debt on its balance sheet in the prior quarter.
Cumulative net cash used in operating activities at the end of the fiscal third quarter was $14.7 million against net cash provided by operating activities of $14.5 million a year ago.
Fiscal 2022 Guidance
Surmodics lowered its full-year revenue outlook to $97 million-$99 million from $98 million-$101 million in anticipation of softness in customer demand. The Zacks Consensus Estimate for the same is currently pegged at $100.7 million.
The company, however, favorably revised the upper end of its guidance for earnings on the back of solid performance in the first half of 2022 and continued investments to accelerate its strategy.
Adjusted loss per share for fiscal 2022 is now expected within the range of $1.35-$1.50, compared with the earlier-provided projection of a loss of $1.35-$1.70. The Zacks Consensus Estimate for the same is currently pegged at a loss of $1.15 per share.
Our Take
Surmodics exited the third quarter of fiscal 2022 with revenues in line with management expectations. The company registered robust Product sales on the back on continued demand for its medical devices and IVD products.
Surmodics confirmed making crucial progress on its SurVeil drug-coated balloon (DCB) premarket approval submission. The company is likely to record $27-30 million in milestone payments in fiscal 2022 or 2023 following anticipated approval for SurVeil DCB. Strong potential in the company’s Sublime Radial Access device and Pounce Arterial Thrombectomy platform raise our optimism about the company.
However, the company’s revenues missed estimates, indicating a potential softness in the targeted market. But we are encouraged by the company’s strategies that have resulted in the improved margin, which is likely to continue in the second half of 2022.
Surmodics’ shares have declined 25.6% so far this year compared with the industry’s decrease of 25.2%.
Image Source: Zacks Investment Research
Zacks Rank and Other Key Picks
Currently, Surmodics carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the pharma/biotech sector include Lantheus , ShockWave Medical and Alkermes (ALKS - Free Report) . While Lantheus and ShockWave Medical sport a Zacks Rank #1 (Strong Buy), Alkermes carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for Lantheus have improved from earnings of $3.04 to $3.08 for 2022 and $3.33 to $3.62 for 2023 in the past 30 days. LNTH has surged 156.6% so far this year.
Lantheus delivered an earnings surprise of 77.82%, on average, in the last four quarters.
ShockWave Medical’s earnings per share estimates have improved from $1.84 to $2.02 for 2022 and from $2.82 to $2.95 for 2023 in the past 30 days. SWAV has declined 19.1% so far this year.
ShockWave Medical delivered an earnings surprise of 189.99%, on average, in the last four quarters.
Alkermes’ earnings per share estimates have improved from breakeven to 4 cents for 2022 and from 56 cents to 59 cents for 2023 in the past 30 days. ALKS has gained 19.6% so far this year.
Alkermes delivered an earnings surprise of 350.48%, on average, in the last four quarters.