We are in the first half of the Q1 reporting cycle and the quarterly performance by the
Medical sector (one of the 16 broad Zacks sectors within the Zacks Industry classification) has been robust so far. Per the latest Earnings Preview, Medical is one of the 10 major Zacks sectors set to report year-over-year earnings and revenue growth. The sector is expected to report 19.8% earnings growth on revenue growth of 10.2% this time around.
More encouragingly, the Q1 earnings scorecard so far reflects year-over-year earnings growth of 28% on revenue growth of 10.5% (for 30.7% of the total market cap that has already reported till Apr 21).
This improvement significantly stemmed from a comparatively stable market condition thanks to vaccine rollouts even amid the emergence of new virus strains and the resurgence of the virus’ next wave.
Integral to the broader Medical sector, MedTech or Zacks-defined
Medical Products companies’ collective business growth is likely to have improved from the last reported quarter with month-wise rebound in base sales volumes on gradual lifting of restrictions in many states and regions. In the first quarter, these companies appropriately invested in virtual physician education, remote clinical support and digital sales enablement suitable for healthcare support amid the pandemic. Besides, testing, vaccine and therapeutic makers have been riding on huge market adoption of their COVID-19-related healthcare-support products and services.
Already, many of these companies have come up with bullish earnings reports. In the first quarter,
Quest Diagnostics’ ( DGX Quick Quote DGX - Free Report) base business recovered to near pre-pandemic levels. Similarly, Abbott ( ABT Quick Quote ABT - Free Report) posted more that 100% adjusted earnings per share growth and 33% organic sales growth for the first quarter. Base business organic sales growth was nearly 6% for the company.
However, some of the diagnostic testing stocks have registered slow down in demand for COVID-19 testing (in line with industry trends). Also, companieswith a huge international base witnessed a reduction in product demand due to economic rout in many developed and emerging geographies in Q1 as well.
The Zacks Medical Product sector currently carries a Zacks Sector Rank in the bottom 20% (204 of 254 industries).
Let’s take a look at four MedTech market leaders scheduled to announce results on Apr 28.
Boston Scientific ( BSX Quick Quote BSX - Free Report) : On a geographic basis, in Q1, organic sales in the United States are once again expected to have been impacted by the sales return reserve related to conversion to a consignment inventory model for the next-generation WATCHMAN FLX device in this region. Internationally, emerging market sales are expected to have been negatively impacted by the ongoing DES tender sales return reserves in China.
The Zacks Consensus Estimate for the first quarter is pegged at earnings per share of 30 cents. Revenues are expected to be $2.61 billion.
Boston Scientific has the right combination of the two key ingredients — a positive
Earnings ESP and a Zacks Rank #3 (Hold) or better — which increases the odds of an earnings beat. Boston Scientific has an Earnings ESP of +5.20% and a Zacks Rank #3.
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Boston Scientific's Watchman US Sale to Aid Q1 Earnings) Align Technology, Inc. ( ALGN Quick Quote ALGN - Free Report) : Per the company’s February update, Align Technology has been registering impressive sales performances for both Invisalign clear aligners and iTero imaging systems. This momentum is likely to have continued during the rest of the first quarter on the back of resumption of practices worldwide. Further, the uptick in Invisalign shipments, observed over the past few months, is likely to have continued during the to-be-reported quarter due to gradual recovery in businesses across all regions. These are likely to have led to a significant uptick in first-quarter revenues.
Align has a Zacks Rank #3 and an Earnings ESP of +1.17%.
Align Technology to Post Q1 Earnings: What's in Store?) Hologic, Inc. ( HOLX Quick Quote HOLX - Free Report) : Management, during the previous earnings call, noted that the Breast Health arm has been witnessing a faster-than-expected return to growth despite the pandemic-led challenging business climate. We remain optimistic about an improved sequential performance by the segment during the fiscal second quarter, given the company’s ongoing efforts to diversify the business across the patient continuum of care.
Hologic has a Zacks Rank #3 and an Earnings ESP of +0.05%.
New Launches in Breast Health to Aid Hologic Q2 Earnings) Integra LifeSciences ( IART Quick Quote IART - Free Report) : Integra’s Codman Specialty Surgical segment’s results are expected to reflect growth in first-quarter 2021 on continued robust demand for market-leading products including DuraGen, antimicrobial catheters and service programmable valves. In January 2021, the company divested the non-core extremity orthopedic business within the Orthopedics and Tissue Technologies arm to focus more on the profitable part of the arm. This selloff should impact the first-quarter 2021 results.
Integra has a Zacks Rank #3 and an Earnings ESP of 0.00%.
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