Tuesday, Canaccord Genuity maintained a Buy rating on Merit Medical Systems , Inc. (NASDAQ:MMSI) stock and increased its price target to $125 from $102. The firm anticipates the recent acquisition of EndoGastric Solutions will contribute positively to the company's revenue growth and earnings per share (EPS) starting in 2025.
Merit Medical, a manufacturer of disposable medical devices, recently announced the asset purchase agreement with EndoGastric Solutions for a total cash consideration of $105 million. EndoGastric Solutions specializes in the treatment of gastroesophageal reflux disease (GERD) and acid reflux with its EsophyX Z+ device, a non-pharmacological, minimally invasive option that reinforces the body's reflux barrier.
The company has updated its financial outlook for fiscal year 2024 (FY24) to include the EndoGastric Solutions acquisition, while also reiterating its standalone financial guidance for the same period.
Merit Medical's updated FY24 sales guidance reflects the addition of the EsophyX Z+ device to its Endoscopy segment. Despite the Q1 performance exceeding expectations, Merit did not adjust its standalone guidance upwards, which may have been anticipated by some investors.
For FY24, the acquisition is expected to be partially dilutive to Merit Medical's profitability. However, the company projects that by FY25, the acquisition will enhance its adjusted gross margin, operating margin, and adjusted EPS.
The assets acquired are reported to have generated $26 million in revenue in 2023, and are expected to contribute between $13 million and $15 million in sales for the current year. This growth rate is estimated to be between 15-20% year-over-year, surpassing Merit's existing growth rate.
The press release also disclosed that Merit Medical's adjusted operating margin, net income, and EPS will likely be diluted due to the acquisition. This includes an approximate $2.7 million reduction in interest income from cash used for the purchase and excludes around $6.5 million in additional non-cash and non-recurring transaction-related expenses.
In other recent news, Merit Medical Systems has made significant strides in its business operations. The healthcare technology giant recently acquired assets from EndoGastric Solutions, a deal that promises to add roughly $30 million in annualized revenue and expand Merit's endoscopy offerings. The company expects this acquisition to contribute $13 to $15 million in revenue from the closing date through December 31, 2024.
Furthermore, Merit Medical reported a 9.3% increase in revenue to $324 million and earnings per share of $0.77 in the first quarter, surpassing analysts' expectations. The company's updated full-year 2024 financial guidance now includes net sales of $1.324 to $1.340 billion, representing a 5% to 7% year-over-year increase, and non-GAAP earnings per share of $3.22 to $3.31, indicating a 7% to 10% rise.
Analysts from Piper Sandler and Wells Fargo (NYSE:WFC) have maintained their Overweight and Equal Weight ratings on Merit Medical's stock, respectively. The company also welcomed Silvia M. Perez to its board of directors, adding over two decades of healthcare industry experience to the team.
Merit Medical also received FDA clearance for its Siege Vascular Plug and launched its Bearing nsPVA Express Prefilled Syringe in the United States and Australia, strengthening its Embolics portfolio. These are recent developments that underline Merit Medical's ongoing growth and strategic direction.
InvestingPro Insights
As Merit Medical Systems (NASDAQ:MMSI) focuses on strategic acquisitions to bolster its portfolio, real-time financial metrics offer a glimpse into the company's current valuation and performance. According to InvestingPro data, Merit Medical holds a market capitalization of approximately $4.98 billion, indicating its significant presence in the medical devices industry. Investors should note its P/E ratio, which stands at 48.26, suggesting a high earnings multiple that may reflect market expectations of future growth, particularly in light of the recent EndoGastric Solutions acquisition. Moreover, the company's revenue growth for the last twelve months as of Q1 2024 is reported at 9.39%, showcasing a solid upward trajectory that Canaccord Genuity anticipates will be further accelerated by the new asset purchase.
Merit Medical's stock stability is highlighted by its low price volatility, an InvestingPro Tip that could reassure investors looking for a steadier investment in the healthcare sector. Additionally, the company's liquid assets surpass short-term obligations, providing financial flexibility that could be crucial in integrating acquisitions like EndoGastric Solutions. For investors keen on further analysis, there are more InvestingPro Tips available, including insights on the company's debt management and valuation multiples. Interested readers can explore these tips and receive up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription using the coupon code PRONEWS24.
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