On Jan 10, we issued an updated research report on Surmodics, Inc. (NASDAQ:SRDX) . Solid growth in Medical Device and IVD businesses drove Surmodics’ growth trajectory. However, foreign exchange woes continue to be headwind for the company. The stock has a Zacks Rank #3 (Hold).
Robust sales growth in the core business segments holds promise for Surmodics. The Medical Devices segment contributes about three-quarters to the company’s total revenues, with majority of it coming from hydrophilic coatings royalties and product sales, including balloon catheters and specialty catheter-based technologies among others.
Meanwhile, the IVD segment has witnessed strong sales of stabilization reagents and molecular diagnostics products. The company plans to continue developing Surmodics' core medical device coatings and diagnostic reagents businesses.
The company's initiative to strengthen research and development programs is also a positive. In the last few years, the company has made several acquisitions which have diversified its revenue base. Further, the latest regulatory approval for SurVeil reflects Surmodics’ solid foothold in the drug-delivery space. Buoyed by these developments, Surmodics issued a solid guidance for fiscal 2018.
On the negative side, weakening U.S. dollar as compared with the Euro is a headwind. As a result, Surmodics reported a $0.3 million foreign exchange loss on its euro-denominated contingent consideration obligation related to the Creagh Medical acquisition in the last quarter. The company had significant foreign currency losses and operating losses in Ireland.
Of the other major concerns, cutthroat competition in the niche space is a drawback. Surmodics’ flagship SurVeil Drug-Coated Balloons faces stiff competition with Medtronic’s (NYSE:MDT) admiral IN.PACT platform
Gloomy Price Scenario
Surmodics’ shares have underperformed the industry over the last year. Specifically, the stock has gained 10.7% against the industry's rally of 24.2%. The current level is also lower than S&P 500 index’s return of 21.6% over the same time frame. Cutthroat competition and a limited consumer base are likely to affect the company’s business.
Key Picks
A few better-ranked stocks in the broader medical sector are Integer Holdings Corporation (NYSE:ITGR) and Bio-Rad Laboratories, Inc. (NYSE:BIO) .
Bio-Rad Laboratories flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 25%.
Integer Holdings has a long-term expected earnings growth rate of 15%. The stock carries a Zacks Rank #2 (Buy).
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Integer Holdings Corporation (ITGR): Free Stock Analysis Report
Medtronic PLC (MDT): Free Stock Analysis Report
Surmodics, Inc. (SRDX): Free Stock Analysis Report
Bio-Rad Laboratories, Inc. (BIO): Free Stock Analysis Report
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