Looking for a turnaround story SurModics, Inc. (SRDX) was sliding for years, but has since refocused on its core businesses and looks to be on the right track.
Company Description
SurModics divested several business units and is now primarily in the medical device and in vitro diagnostics business.
Solid Core Growth
On Nov 3 SurModics reported growth in each of its core business units for the fiscal fourth quarter. Sequentially medical devices and in vitro diagnostics rose were up 7% each. But a decline in pharmaceutical R&D left total revenue down 5%. That, however, is consistent with the company’s efforts to shift its focus towards its core business units.
Earnings per share came in at $0.6, a penny higher than the Zacks Consensus Estimate. SurModics has a rough earnings history, but this gives the company back-to-back surprises.
Pharma Business Sold
The company’s cash balance rose to $68 million, partly thanks to operations but mostly from the proceeds from selling its pharmaceutical business.
Analysts Like What They See
Estimates for this fiscal year, which just started, are already up a dime to $0.46 on the earnings news. Next year’s average forecast is also up 10 cents to $0.55.
There only 1 analyst with an estimate for next year right now, but the other 3 contributing to the fiscal 2012 average should have updated estimates soon. For now though the projected growth rates look great at 42% and 21%, respectively.
Shares Running Higher
SRDX started rebounding nicely in late October and the recent earnings surprise only fueled to fire. Most valuations look a bit on the high side, but at 1.3 times book value it might not be a bad spot to get into this Zacks #1 Rank (Strong Buy).
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
