On Monday, BofA Securities updated its outlook on Merit Medical Systems , Inc. (NASDAQ:MMSI) shares, increasing the price target to $92 from $87 while maintaining a Neutral rating on the stock.
The adjustment follows Merit Medical's announcement of second-quarter earnings at the end of last week, which showcased a revenue of $338 million, marking a 5% year-over-year organic growth and surpassing analyst predictions by 1%. Additionally, the company's earnings per share (EPS) exceeded expectations by 4 cents, or 5%.
Merit Medical also revised its full-year 2024 revenue guidance upwards to a range of $1.335-1.345 billion, reflecting a 6-7% constant currency growth, an increase from the previously forecasted $1.324-1.340 billion range.
This update was provided a month after the acquisition of EsophyX Z+. The company's EPS forecast for FY24 was similarly adjusted, now set at $3.27-3.35, representing a 15-17% increase and factoring in a 4-6 cent dilution from the EsophyX integration.
The company's free cash flow (FCF) for the second quarter was notably strong at $58 million, driven by improvements in working capital. As a result, Merit Medical has also raised its FCF projection for FY24 to $130 million, up from the previous $115 million estimate.
Looking ahead, the approval of WRAPSODY in the United States is seen as the primary catalyst for Merit Medical's stock, particularly now that the premarket approval (PMA) has been submitted.
In the meantime, potential smaller catalysts could emerge from data presentations at two medical conferences scheduled for this fall, although it is uncertain how much detail Merit will provide prior to the WRAPSODY approval.
The revised price objective of $92 is based on a 17x multiple of the company's estimated 2025 enterprise value to EBITDA ratio. Despite the positive second-quarter performance and improved forecasts, the firm suggests that significant stock appreciation might be limited until further information on WRAPSODY becomes available, especially given Merit Medical's current premium valuation compared to its peers.
In other recent news, Merit Medical Systems reported robust financial results for the second quarter of 2024, with total revenue reaching $338 million, a 5.6% increase year-over-year on a GAAP basis. This exceeded expectations, driven by organic growth and acquired products.
The company also acquired EndoGastric Solutions for $105 million, enhancing its endoscopy portfolio. Furthermore, the Cardiovascular and Endoscopy segments reported revenue growth of 6% and 16%, respectively, for the quarter.
The company's updated financial guidance for 2024 projects a net revenue increase of 6-7% and non-GAAP diluted EPS growth of 15-17%. The acquisition of EndoGastric Solutions is expected to be accretive to financials in the first full year post-closing.
On a bearish note, OEM product sales were softer than expected due to demand fluctuations, and the company faces a headwind from changes in foreign currency exchange rates.
However, bullish highlights include strong sales in peripheral intervention products and increased U.S. sales by 8.5%. The company also anticipates the EsophyX Z+ device to contribute $13-15 million in sales in the second half of 2024. These are among the recent developments for Merit Medical Systems.
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