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Can Wright Medical (WMGI) Surprise Investors in Q4 Earnings?

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Global medical device company, Wright Medical Group N.V. is scheduled to release fourth-quarter 2016 results on Feb 21.

Wright Medical has an impressive track record of beating estimates in all the four trailing quarters. In the last reported quarter, it recorded a positive earnings surprise of 5.00%, bringing the four-quarter average to 45.78%. Over the past three months, Wright Medical returned almost 15.54%, which is higher than the Zacks categorized Medical Instruments sub-industry’s gain of roughly 5.38%. Also, Wright Medical has a decent earnings surprise history, as evident from the chart below.

Factors at Play

Wright Medical’s innovative products are expected to expand its customer base that will eventually drive revenues in the fourth quarter. High incidence of osteoporosis, osteoarthritis, obesity and an aging population is increasingly causing the global orthopedic market to grow each passing day. Thus, Wright Medical is expected to benefit from the developing trends of the industry. Also, the company has significant presence in key emerging markets like Asia, which further boosts its long-term prospects.

The company continues to witness flat pricing, due to price discounting in larger accounts, limited product offerings and international price cuts. The advent of group purchasing organizations (GPOs) is also keeping prices under pressure. Also, Wright Medical derives a significant part of its total revenues from international operations, which is being affected by fluctuations in foreign currency exchange rates.

However, overall activities of Wright Medical during the fourth quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter to be reported fell 2 cents to a loss of 11 cents per share in the last 90 days.

Earnings Whispers

Our proven model does not conclusively show that Wright Medical is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP:  Wright Medical has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 11 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Wright Medical carries a Zacks Rank #3, which increases the predictive power of ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

Though a favorable Zacks Rank increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

BioMarin Pharmaceutical Inc. (BMRN - Free Report) has an Earnings ESP of +7.5% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here.

Antero Midstream Partners LP (AM - Free Report) has an Earnings ESP of +11.43% and a Zacks Rank #3.

Century Aluminum Company (CENX - Free Report) has an Earnings ESP of +62.5% and a Zacks Rank #3.

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