Marginal Earnings Beat at SurModics, Sales Miss - Analyst Blog

SurModics' SRDX second quarter fiscal 2014 (ended Mar 31, 2014) adjusted earnings of 22 cents per share beat the Zacks Consensus Estimate by 2 cents. The second quarter fiscal 2014 earnings increased 10% from the year-ago period.

Quarterly Highlights

Revenues (on an adjusted basis) declined marginally to $13.6 million, short of the Zacks Consensus Estimate of $14 million. Reduced sales of in vitro diagnostics offerings were the primary reason behind the year-over-year decline. A slowdown in sales in Europe coupled with a shift in order patterns by a few key customers hurt segmental sales in the quarter.

For the reported quarter, royalties and license fees accounted for approximately 53.9% of total revenues with product sales and research & development accounting for 38% and 8.1%, respectively.

SurModics' revenues from the Medical Devices segment came in at approximately $10.5 million, up 7.7%. Bulk of the segmental revenues came from hydrophilic coatings royalties, which climbed 3% from the year-ago period on an adjusted basis. The company is developing its high potential drug coated balloon program. The coronary sub-group grew by 3% in the reported quarter.

SurModics exited the quarter with cash and investments of $51.3 million with no debt. During the second quarter of fiscal 2014, SurModics bought back 105,566 shares for $2.6 million under the repurchase program, worth $20 million, cleared in fiscal 2013. The repurchase program, which has been fully utilized, highlights the company's commitment to create value for shareholders.

 Fiscal 2014 Projection

SurModics lowered its fiscal 2014 revenues guidance to the range of $56 million–$58.5 million from $58–$62 million. The guidance range is below the Zacks Consensus Estimate of $59 million. The company continues to forecast fiscal 2014 capital expenditure in the range of $2.2–$2.5 million.

SurModics currently carries a Zacks Rank #3 (Hold). Investors interested in the medical sector can also consider stocks like Perrigo PRGO, Mead Johnson Nutrition Company MJN and Rockwell Medical, Inc. RMTI.  All 3 stocks carry a Zacks Rank #2 (Buy).