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Zacks Industry Outlook Highlights: Johnson & Johnson, Medtronic and Smith & Nephew
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For Immediate Release
Chicago, IL – Oct 25, 2017 – Today, Zacks Equity Research discusses the Industry: Medical Technology, Part 1, including Johnson & Johnson (JNJ - Free Report) , Medtronic (MDT - Free Report) and Smith & Nephew (SNN - Free Report) .
Third-quarter releases are keeping Wall Street on its toes. Even then, uncertainty related to the Trump administration’s Obamacare repeal & replacement effort refuses to fully go away. The President’s latest executive order has added to the issues facing the industry.
Executive Order: A Blunder?
As per critics, this executive order, which seemingly looks not much different from the basic structure of existing health policy, is actually set to break the entire healthcare system from within. According to them, this order, forsaking the consideration of pre-existing health conditions, has been designed to push people to “junk” insurance plans. An article on CNN Money says, “It could lure younger, healthier consumers away from Obamacare with cheaper, but skimpier policies, while leaving sicker folks to pay higher premiums on the exchanges.”
No wonder voices against this proposition move are getting louder. The American Hospital Association has put forward an extremely bearish view on the executive order related to promoting health care choice and competition. The association is apprehensive that the order will solely allow health insurance plans that cover fewer benefits and give fewer consumer protections.
Also, according to a report published in Business Wire, a set of eighteen different patient groups have released a joint statement, visibly threatening the fact that this executive order may destabilize the insurance market by splitting it into two groups — those who need comprehensive benefits that they are getting under the existing law and those who are currently healthy and can gamble with substandard coverage.
As per the joint statement, “This order has the potential to price millions of people with pre-existing conditions and serious illnesses out of the individual insurance market and put millions more at risk through the sale of insurance plans that won’t cover all the services patients want to stay healthy or the critical care they need when they get sick.”
With heavyweight names like the American Cancer Society, the American Heart Association, National Health Council and the American Diabetes Association, this jointly released statement is undoubtedly generating considerable opposition. Even chances that the new legislative change may result in lower taxes and eased regulations for the industry as a whole are not bringing the nation together.
Troubled Times for MedTech, Too
While twists and turns continue to unfold at Capitol Hill, the scenario within the medical device space is getting gloomier. The executive order points to a shrinking customer base, indicating a cut in demand for expensive medical procedures and devices. This may lead to a major supply/demand disequilibrium within the medical device space.
This apart, tax-related confusion remains a huge burden on the MedTech fraternity. Earlier, this community was quite hopeful of the change in power as Trump’s proposed policies always talked about the abolition of the infamous 2.3% medical device sales tax. This measure, commonly addressed as the fund of the Affordable Care Act, has taken a toll on the entire medical device industry since its enactment in 2013.
A report by FierceMedicalDevices released at that time had revealed that Johnson & Johnson made a payment of $180 million as medical device sales tax in 2014. Medtronic, the legacy Covidien, and Smith & Nephew paid $112 million, $60 million and $25 million, respectively, during that year.
Realizing the severe linkage effect of this tax among the MedTech majors as well as small players, the U.S. House and Senate temporarily suspended it (for just two years) in 2015. Now, MedTech players will find themselves facing a similar situation (from the beginning of 2018 itself), if the policy remains intact.
Unfortunately, while the Trump administration has been targeting a complete annulment of many other taxes including the abolishment of the Cadillac tax (40% excise tax on high-cost healthcare plans) in the near future, it has not come up with any concrete plan to replace the MedTech tax as of yet.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: Johnson & Johnson, Medtronic and Smith & Nephew
For Immediate Release
Chicago, IL – Oct 25, 2017 – Today, Zacks Equity Research discusses the Industry: Medical Technology, Part 1, including Johnson & Johnson (JNJ - Free Report) , Medtronic (MDT - Free Report) and Smith & Nephew (SNN - Free Report) .
Industry: Medical Technology, Part 1
Link: https://www.zacks.com/commentary/133558/medtech-industry-outlook---october-2017
Third-quarter releases are keeping Wall Street on its toes. Even then, uncertainty related to the Trump administration’s Obamacare repeal & replacement effort refuses to fully go away. The President’s latest executive order has added to the issues facing the industry.
Executive Order: A Blunder?
As per critics, this executive order, which seemingly looks not much different from the basic structure of existing health policy, is actually set to break the entire healthcare system from within. According to them, this order, forsaking the consideration of pre-existing health conditions, has been designed to push people to “junk” insurance plans. An article on CNN Money says, “It could lure younger, healthier consumers away from Obamacare with cheaper, but skimpier policies, while leaving sicker folks to pay higher premiums on the exchanges.”
No wonder voices against this proposition move are getting louder. The American Hospital Association has put forward an extremely bearish view on the executive order related to promoting health care choice and competition. The association is apprehensive that the order will solely allow health insurance plans that cover fewer benefits and give fewer consumer protections.
Also, according to a report published in Business Wire, a set of eighteen different patient groups have released a joint statement, visibly threatening the fact that this executive order may destabilize the insurance market by splitting it into two groups — those who need comprehensive benefits that they are getting under the existing law and those who are currently healthy and can gamble with substandard coverage.
As per the joint statement, “This order has the potential to price millions of people with pre-existing conditions and serious illnesses out of the individual insurance market and put millions more at risk through the sale of insurance plans that won’t cover all the services patients want to stay healthy or the critical care they need when they get sick.”
With heavyweight names like the American Cancer Society, the American Heart Association, National Health Council and the American Diabetes Association, this jointly released statement is undoubtedly generating considerable opposition. Even chances that the new legislative change may result in lower taxes and eased regulations for the industry as a whole are not bringing the nation together.
Troubled Times for MedTech, Too
While twists and turns continue to unfold at Capitol Hill, the scenario within the medical device space is getting gloomier. The executive order points to a shrinking customer base, indicating a cut in demand for expensive medical procedures and devices. This may lead to a major supply/demand disequilibrium within the medical device space.
This apart, tax-related confusion remains a huge burden on the MedTech fraternity. Earlier, this community was quite hopeful of the change in power as Trump’s proposed policies always talked about the abolition of the infamous 2.3% medical device sales tax. This measure, commonly addressed as the fund of the Affordable Care Act, has taken a toll on the entire medical device industry since its enactment in 2013.
A report by FierceMedicalDevices released at that time had revealed that Johnson & Johnson made a payment of $180 million as medical device sales tax in 2014. Medtronic, the legacy Covidien, and Smith & Nephew paid $112 million, $60 million and $25 million, respectively, during that year.
Realizing the severe linkage effect of this tax among the MedTech majors as well as small players, the U.S. House and Senate temporarily suspended it (for just two years) in 2015. Now, MedTech players will find themselves facing a similar situation (from the beginning of 2018 itself), if the policy remains intact.
Unfortunately, while the Trump administration has been targeting a complete annulment of many other taxes including the abolishment of the Cadillac tax (40% excise tax on high-cost healthcare plans) in the near future, it has not come up with any concrete plan to replace the MedTech tax as of yet.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.