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Will Sage-Unit Recall Hurt Stryker's (SYK) Q3 Earnings?
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Stryker Corporation (SYK - Free Report) , a leading player in the medical technology space, is set to report third-quarter 2017 results on Oct 26, after the closing bell.
In August, Stryker announced a voluntary recall of the Oral Care line-up, which was offered by the company’s Sage-Products unit. Added to the voluntary recall, the company had placed a temporary hold on certain cloth-based products. While this might mar third-quarter results, an expected improvement in revenues at the major revenue segments might help the company generate solid results this season.
It is important to note that Stryker delivered positive earnings surprises in the past four quarters, the average being 1.3%. Meanwhile, the Zacks Consensus Estimate for third-quarter revenues stands at $2.97 billion, up 4.9% on a year-over-year basis. Furthermore, the Zacks Consensus Estimate for earnings stands at $1.50 per share, up 8.1% year over year.
Guidance Takes a Hit: The recent product recall is likely to impact the company’s sales and operating income. In fact for the third quarter, Stryker estimates adjusted net earnings per diluted share at the low end of its previously issued $1.50-$1.55 band. The recall decision followed complaints of minor irritation and allergic reactions from consumers. However, management expects to reinitiate full supply capacity by the end of the year.
Neurotechnology & Spine Segment: Stryker has been grappling with supply issues in the spine unit of Neurotechnology and spine segment for long. Of the major factors hurting the segment, challenging global economic conditions and fluctuations in foreign currency exchange rates deserve a mention. Precisely, foreign exchange volatility will affect adjusted earnings per share by approximately 2 cents in the third quarter.
Owing to softness in the spine unit, the Zacks Consensus Estimate for the Neurotechnology & Spine segment decreased 2.3% sequentially to $1.31 billion.
Lower Demand for Health Care Products: Stryker has been facing challenging global economic conditions, particularly in the United States and Western Europe of late. The ongoing political conundrum pertaining to the repealing of Obamacare has given rise to uncertainties in the Medical Products space.
Added to this, lower reimbursements for medical products and services have been imposing a downward pressure on prices of the company’s products. Furthermore, longer sales cycles and slower adoption of new technologies might mar revenues in the third quarter.
MedSurg Unit: Declining sales in the Medsurg Equipment segment is likely to impede revenue growth in the third quarter. Notably, the Zacks Consensus Estimate for revenues at the segment stands at $1.31 billion, down 2.4% sequentially.
However, solid prospects in Canada, Australia and China are likely to boost the company’s MedSurg Instrument unit. Notably, the Zacks Consensus Estimate for the segment increased 1.8% sequentially and 5% on a year-over-year basis. It is important to note that, in the last reported quarter, MedSurg as a whole posted organic growth of 6.7% on a year-over-year basis.
However, our quantitative model does not conclusively show an earnings beat for Stryker this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. This is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Stryker is -0.58%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Stryker currently carries a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement.
Stocks Worth a Look
Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
Medpace Holdings Inc. (MEDP - Free Report) has an Earnings ESP of +0.47% and a Zacks Rank #3.
Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +1.23% and a Zacks Rank #3.
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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Will Sage-Unit Recall Hurt Stryker's (SYK) Q3 Earnings?
Stryker Corporation (SYK - Free Report) , a leading player in the medical technology space, is set to report third-quarter 2017 results on Oct 26, after the closing bell.
In August, Stryker announced a voluntary recall of the Oral Care line-up, which was offered by the company’s Sage-Products unit. Added to the voluntary recall, the company had placed a temporary hold on certain cloth-based products. While this might mar third-quarter results, an expected improvement in revenues at the major revenue segments might help the company generate solid results this season.
It is important to note that Stryker delivered positive earnings surprises in the past four quarters, the average being 1.3%. Meanwhile, the Zacks Consensus Estimate for third-quarter revenues stands at $2.97 billion, up 4.9% on a year-over-year basis. Furthermore, the Zacks Consensus Estimate for earnings stands at $1.50 per share, up 8.1% year over year.
Stryker Corporation Price and Consensus
Stryker Corporation Price and Consensus | Stryker Corporation Quote
Factors at Play
Guidance Takes a Hit: The recent product recall is likely to impact the company’s sales and operating income. In fact for the third quarter, Stryker estimates adjusted net earnings per diluted share at the low end of its previously issued $1.50-$1.55 band. The recall decision followed complaints of minor irritation and allergic reactions from consumers. However, management expects to reinitiate full supply capacity by the end of the year.
Neurotechnology & Spine Segment: Stryker has been grappling with supply issues in the spine unit of Neurotechnology and spine segment for long. Of the major factors hurting the segment, challenging global economic conditions and fluctuations in foreign currency exchange rates deserve a mention. Precisely, foreign exchange volatility will affect adjusted earnings per share by approximately 2 cents in the third quarter.
Owing to softness in the spine unit, the Zacks Consensus Estimate for the Neurotechnology & Spine segment decreased 2.3% sequentially to $1.31 billion.
Lower Demand for Health Care Products: Stryker has been facing challenging global economic conditions, particularly in the United States and Western Europe of late. The ongoing political conundrum pertaining to the repealing of Obamacare has given rise to uncertainties in the Medical Products space.
Added to this, lower reimbursements for medical products and services have been imposing a downward pressure on prices of the company’s products. Furthermore, longer sales cycles and slower adoption of new technologies might mar revenues in the third quarter.
MedSurg Unit: Declining sales in the Medsurg Equipment segment is likely to impede revenue growth in the third quarter. Notably, the Zacks Consensus Estimate for revenues at the segment stands at $1.31 billion, down 2.4% sequentially.
However, solid prospects in Canada, Australia and China are likely to boost the company’s MedSurg Instrument unit. Notably, the Zacks Consensus Estimate for the segment increased 1.8% sequentially and 5% on a year-over-year basis. It is important to note that, in the last reported quarter, MedSurg as a whole posted organic growth of 6.7% on a year-over-year basis.
However, our quantitative model does not conclusively show an earnings beat for Stryker this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. This is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Stryker is -0.58%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Stryker currently carries a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement.
Stocks Worth a Look
Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
INC Research Holdings, Inc. (INCR - Free Report) has an Earnings ESP of +2.02% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace Holdings Inc. (MEDP - Free Report) has an Earnings ESP of +0.47% and a Zacks Rank #3.
Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +1.23% and a Zacks Rank #3.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>