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3 Medical Product Stocks Poised to Beat This Earnings Season
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So far, this reporting cycle has displayed a year-over-year improvement for the medical product companies within the broader Medical sector. Overall, the results of the majority of medical device stocks so far have shown accelerated base business growth through the months of the first quarter compared with 2020 given the reduction of severity of COVID-19 despite the emergence of new virus variants.
However, if we consider the performance on a sequential basis, the Q1 results of the majority of the companies significantly declined. A number of MedTech players witnessed severe staffing shortages and supply-chain hazards in the Q1 months, thanks to the emergence of the new COVID variants.
Meanwhile, industry players that have well-adapted to changing consumer preferences are witnessing a continued uptrend in their stock prices. Also, the legacy base business recovery of the companies through Q1 was very sharp.
Here we talk about three stocks, Alcon (ALC - Free Report) , Zimmer Biomet (ZBH - Free Report) and Cardiovascular Systems that are expected to beat earnings estimates in the ongoing reporting cycle.
Two Major Q1 Trends
The second half of the Q1 reporting cycle depicted a solid rebound in base sales volumes with the companies reaching their pre-pandemic legacy business level. This was attributed to a significant reduction in COVID-led fatality across the United States and other developed markets. With the gradual lifting of restrictions and people getting back to pre-pandemic normalcy, there has been a significant rebound in non-COVID and elective legacy businesses of the medical product companies.
However, a contrasting trend is also evident. Considering the deteriorating trade situation on continuing emergence of more contagious COVID-19 variants like Delta, Omicron and XE, the IMF came up with its January 2022 World Economic Outlook Update. The update noted that global growth is expected to moderate from 5.9% in 2021 to 4.4% in 2022—half a percentage point lower for 2022 than in the October World Economic Outlook (WEO), largely reflecting forecast cuts in the two largest economies—the USA and China.
This deteriorating economic outlook is evident in the medical products sector’s sequential business slowdown in Q1. The industry players who had witnessed a strong rebound in product demand across core business segments during the majority of 2021 have collectively faced a setback so far in the 2022 in terms of disrupted procedure volumes and staffing shortages in major international geographies and the United States. Also, a significant drop in COVID testing demand during the second half of Q1 on declining cases has deterred business growth for many companies.
Q1 Scorecard Thus Far
Per the latest Earnings Preview, 7% of the companies in the broader Medical sector, constituting nearly 27.6% of the sector’s market capitalization, have already reported earnings. Of these, 100% beat in terms of earnings and 75% exceeded the revenue estimates. Earnings increased 8.4% year over year on 13.5% higher revenues. Overall, first-quarter earnings for the Medical sector are expected to rise 10.3% on a 13.3% sales increase.
Abbott (ABT - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) are a few companies whose base-business performance registered a strong recovery rate.
In Q1, Abbott continued to experience solid organic growth in most of its key global markets. According to Abbott, organic sales improvement was backed by double-digit growth in several geographies and therapeutic areas, including gastroenterology, respiratory and central nervous system/pain management.
Intuitive Surgical too ended the first quarter on a strong note. The company displayed strong segmental performance and robust growth in da Vinci procedure volume in the first quarter. Overall international sales improved in the first quarter.
On the other hand, Quest Diagnostics reported a year-over-year decline in revenues and adjusted earnings due to lower COVID-19 testing demand during the first quarter. According to the company, COVID-19 volumes remained strong early in the first quarter and decreased in February and March, in line with the market.
Zacks Methodology
Given the high degree of diversity in the Medical Products industry, finding the right stocks with the potential to beat estimates might be quite a daunting task.
However, our proprietary Zacks methodology makes this fairly simple.
Our research shows that for stocks with this combination, the chances of an earnings surprise are as high as 70%.
Earnings ESP provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here we present three medical product stocks that are expected to beat earnings estimates in this reporting cycle.
Alcon: Alcon’s net sales are expected to have witnessed strong gains in Q1, driven by growth across all sales categories in Surgical and Vision Care, which was driven primarily by growing demand for new products, solid commercial execution and strong market recovery in the United States. Alcon continues to see strong demand for PRECISION1 and PRECISION1 for Astigmatism, which are the company’s newest contact lenses for the mainstream market.
Alcon’s Earnings ESP of +10.04% and a Zacks Rank #2 raise the possibility of an earnings surprise in the to-be-reported quarter.
Alcon is slated to release results for the first quarter of 2022 on May 3.
Zimmer Biomet: Zimmer Biomet is expected to have witnessed a strong sales gain in Q1 on growing demand and momentum for ROSA robotics line globally. The team recently delivered a successful limited launch of the world's first and only smart knee, the Persona iQ. Per the last update, the customer feedback was good. This is expected to have a positive contribution to Zimmer Biomet’s Q1 results.
Zimmer Biomet is scheduled to release first-quarter 2022 results on May 3.
ZBH has an Earnings ESP of +0.36% and a Zacks Rank #3.
Zimmer Biomet Holdings, Inc. Price and EPS Surprise
Cardiovascular Systems: Cardiovascular Systems is expected to have gained in its third quarter of fiscal 2022 from continued strength in Japan coupled with the launch of the coronary Orbital Atherectomy System (OAS) in Europe. We also expect to see a rebound in the coronary business as cath labs have resumed the use of atherectomy to treat lesions with intimal and medial calcium, heavy stenosis and multivessel disease.
Cardiovascular Systems is expected to release third-quarter fiscal 2022 results soon.
Cardiovascular Systems has an Earnings ESP of +13.77% and a Zacks Rank #3.
Image: Bigstock
3 Medical Product Stocks Poised to Beat This Earnings Season
So far, this reporting cycle has displayed a year-over-year improvement for the medical product companies within the broader Medical sector. Overall, the results of the majority of medical device stocks so far have shown accelerated base business growth through the months of the first quarter compared with 2020 given the reduction of severity of COVID-19 despite the emergence of new virus variants.
However, if we consider the performance on a sequential basis, the Q1 results of the majority of the companies significantly declined. A number of MedTech players witnessed severe staffing shortages and supply-chain hazards in the Q1 months, thanks to the emergence of the new COVID variants.
Meanwhile, industry players that have well-adapted to changing consumer preferences are witnessing a continued uptrend in their stock prices. Also, the legacy base business recovery of the companies through Q1 was very sharp.
Here we talk about three stocks, Alcon (ALC - Free Report) , Zimmer Biomet (ZBH - Free Report) and Cardiovascular Systems that are expected to beat earnings estimates in the ongoing reporting cycle.
Two Major Q1 Trends
The second half of the Q1 reporting cycle depicted a solid rebound in base sales volumes with the companies reaching their pre-pandemic legacy business level. This was attributed to a significant reduction in COVID-led fatality across the United States and other developed markets. With the gradual lifting of restrictions and people getting back to pre-pandemic normalcy, there has been a significant rebound in non-COVID and elective legacy businesses of the medical product companies.
However, a contrasting trend is also evident. Considering the deteriorating trade situation on continuing emergence of more contagious COVID-19 variants like Delta, Omicron and XE, the IMF came up with its January 2022 World Economic Outlook Update. The update noted that global growth is expected to moderate from 5.9% in 2021 to 4.4% in 2022—half a percentage point lower for 2022 than in the October World Economic Outlook (WEO), largely reflecting forecast cuts in the two largest economies—the USA and China.
This deteriorating economic outlook is evident in the medical products sector’s sequential business slowdown in Q1. The industry players who had witnessed a strong rebound in product demand across core business segments during the majority of 2021 have collectively faced a setback so far in the 2022 in terms of disrupted procedure volumes and staffing shortages in major international geographies and the United States. Also, a significant drop in COVID testing demand during the second half of Q1 on declining cases has deterred business growth for many companies.
Q1 Scorecard Thus Far
Per the latest Earnings Preview, 7% of the companies in the broader Medical sector, constituting nearly 27.6% of the sector’s market capitalization, have already reported earnings. Of these, 100% beat in terms of earnings and 75% exceeded the revenue estimates. Earnings increased 8.4% year over year on 13.5% higher revenues. Overall, first-quarter earnings for the Medical sector are expected to rise 10.3% on a 13.3% sales increase.
Abbott (ABT - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) are a few companies whose base-business performance registered a strong recovery rate.
In Q1, Abbott continued to experience solid organic growth in most of its key global markets. According to Abbott, organic sales improvement was backed by double-digit growth in several geographies and therapeutic areas, including gastroenterology, respiratory and central nervous system/pain management.
Intuitive Surgical too ended the first quarter on a strong note. The company displayed strong segmental performance and robust growth in da Vinci procedure volume in the first quarter. Overall international sales improved in the first quarter.
On the other hand, Quest Diagnostics reported a year-over-year decline in revenues and adjusted earnings due to lower COVID-19 testing demand during the first quarter. According to the company, COVID-19 volumes remained strong early in the first quarter and decreased in February and March, in line with the market.
Zacks Methodology
Given the high degree of diversity in the Medical Products industry, finding the right stocks with the potential to beat estimates might be quite a daunting task.
However, our proprietary Zacks methodology makes this fairly simple.
We are focusing on stocks that have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with this combination, the chances of an earnings surprise are as high as 70%.
Earnings ESP provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here we present three medical product stocks that are expected to beat earnings estimates in this reporting cycle.
Alcon: Alcon’s net sales are expected to have witnessed strong gains in Q1, driven by growth across all sales categories in Surgical and Vision Care, which was driven primarily by growing demand for new products, solid commercial execution and strong market recovery in the United States. Alcon continues to see strong demand for PRECISION1 and PRECISION1 for Astigmatism, which are the company’s newest contact lenses for the mainstream market.
Alcon’s Earnings ESP of +10.04% and a Zacks Rank #2 raise the possibility of an earnings surprise in the to-be-reported quarter.
Alcon is slated to release results for the first quarter of 2022 on May 3.
Alcon Price and EPS Surprise
Alcon price-eps-surprise | Alcon Quote
Zimmer Biomet: Zimmer Biomet is expected to have witnessed a strong sales gain in Q1 on growing demand and momentum for ROSA robotics line globally. The team recently delivered a successful limited launch of the world's first and only smart knee, the Persona iQ. Per the last update, the customer feedback was good. This is expected to have a positive contribution to Zimmer Biomet’s Q1 results.
Zimmer Biomet is scheduled to release first-quarter 2022 results on May 3.
ZBH has an Earnings ESP of +0.36% and a Zacks Rank #3.
Zimmer Biomet Holdings, Inc. Price and EPS Surprise
Zimmer Biomet Holdings, Inc. price-eps-surprise | Zimmer Biomet Holdings, Inc. Quote
Cardiovascular Systems: Cardiovascular Systems is expected to have gained in its third quarter of fiscal 2022 from continued strength in Japan coupled with the launch of the coronary Orbital Atherectomy System (OAS) in Europe. We also expect to see a rebound in the coronary business as cath labs have resumed the use of atherectomy to treat lesions with intimal and medial calcium, heavy stenosis and multivessel disease.
Cardiovascular Systems is expected to release third-quarter fiscal 2022 results soon.
Cardiovascular Systems has an Earnings ESP of +13.77% and a Zacks Rank #3.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Cardiovascular Systems, Inc. Price and EPS Surprise
Cardiovascular Systems, Inc. price-eps-surprise | Cardiovascular Systems, Inc. Quote
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.