Merit Medical Systems Q2 Beat Expectations: Analysts Say China/Russia Headwinds Hamper Guidance Raise

Tuesday, Merit Medical Systems Inc MMSI announced Q2 FY23 revenue of $320.1 million, up 8.5% Y/Y, beating the consensus of $310.45 million.

Constant currency revenue, organic, for Q2, increased 9.1% Y/Y.

Merit's adjusted gross margin was 51.4%, compared to 49.3% a year ago.

The company reported Q2 adjusted EPS of $0.81 compared to $0.73 a year ago, beating the Wall Street estimate of $0.75.

Cardiovascular Peripheral Intervention segment sales increased 13.5% Y/Y to $125.91 million. Endoscopy Devices clocked sales of $8.78 million, up 5.7%.

Needham analysts Mike Matson, Joseph Conway, and David Saxon say Merit Medical's 2Q23 revenue and EPS beat consensus but maintained its 2023 revenue and EPS guidance, implying slower growth in 2H23. 

The analysts say that while investors are likely to be disappointed by the lack of a guidance increase, management expects modest headwinds from volume-based purchasing in China and Russian sanctions, which are unfortunately outside its control. 

Needham writes that results for the second half of the year are expected to come well above guidance, which is conservative, although growth may be slower than the first half of 2023.

The analysts maintain a Buy with a price target of $96.

Price Action: MMSI shares are down 11.03% to $72.54 at the last check Wednesday.

Now Read: Trading Strategies for Meta Platforms Stock Before And After Q2 Earnings