Merit Medical plummets on Q3 earnings, rev misses

Merit Medical (NSDQ:MMSI) today released its 3rd quarter earnings, missing on both earnings and revenue and seeing a significant drop in share value.

South Jordan, Utah-based Merit Medical reported profits of $4.8 million, or 11¢ per share, on sales of $136.1 million for the 3 months ended September 30.

That amounts to a 37.9% bottom-line loss on mild sales growth of 5.7%, compared with the same period last year.

Adjusted to exclude 1-time items, earnings per share were 20¢. Analysts on Wall Street were expecting 23¢ adjusted EPS from Merit, and revenues of $141.2 million, which the company missed.

Wall Street’s response has been significant, with Merit Medical plummeting over 25% to $17.90 as of 1:46 p.m. EDT.

“The 3rd quarter, as we discussed in our 2nd quarter call, had most of the elements of a ‘summer quarter. Revenues for the 3rd quarter of 2015 were down approximately $2 million from the second quarter of 2015, but were up 6% from the third quarter of 2014. As could be expected, contribution was lower, and consequently, gross margins were affected. But more importantly, we view this as a seasonal phenomenon and now behind us,” CEO Fred Lampropoulos said in an SEC filing..

“Additionally, the start-up of our Tijuana, Mexico facility also affected gross margins. In the past few weeks, we have moved more products to be manufactured there,” Lampropoulos said. “These are the 1st of several product lines beyond the legacy product lines that were manufactured there already. We believe the next phase of product lines that we plan to move there late this year or in the early 1st quarter of 2016 will bring us to break-even as to overhead absorption in our Tijuana facility. Beyond that, we believe future product transfers will contribute to increased gross margins.”

Despite the drop in share value and misses for the quarter, Lampropoulos said the company would maintain its guidance for the year.

“Yes, we’ll reaffirm our top line and our bottom line. I will say and I think based on the first three quarters you may see a little mix, a difference in the gross margins as you’ve seen in this quarter and others, and then a maintenance and below the expectations on the SG&A side and probably a little moderation in the fourth quarter on the downside in terms of R&D,” Lampropoulos said during an earnings conference call.

In July, Merit beat expectations for Q2 by a slim margin, topping forecasts for sales and earnings. The company also announced it expanded its distribution center in the Netherlands.

Merit Medical reported profits of $7.4 million, or 17¢ per share, on sales of $138.1 million for the 3 months ended June 30. That amounts to a 99.2% bottom line gain on sales growth of 7.2% compared with the same period last year.

Adjusted to exclude 1-time items, earnings per share were 25¢, beating analysts expectations by 2¢, where analysts were looking for sales of $135.8 million.

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