Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Merit Medical Systems (NASDAQ: MMSI ) -- a manufacturer of disposable medical devices in cardiology, radiology, and endoscopy -- plunged as much as 27% after reporting its fourth-quarter earnings results.
So what: For the quarter, Merit Medical reported a 12% increase in revenue to $102.2 million and $0.15 in EPS compared to $0.18 in the year-ago period. While surpassing the Street's expectation of just $100.9 million in revenue, it fell $0.04 short of the $0.19 in EPS that was forecast. It actually got even worse from an earnings perspective with the company's 2013 guidance. For the upcoming year, Merit anticipates revenue of $455 million to $465 million and adjusted EPS of $0.61-$0.67. Current estimates on the Street called for $446.9 million in revenue and $0.89 in EPS.
Now what: Say hello to higher research and development costs and the introduction of the medical device excise tax! Sales of Merit's products appear to be relatively healthy; unfortunately, the industry is highly competitive, and R&D expenses and taxes are rising. While I'm tempted to call Merit an intriguing value here, the scope of the miss is far too large for me to just consider it a one-time thing, and I'd suggest keeping your distance for at least the next quarter or two.
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