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Medical Device Stocks' Earnings on Jul 28: TMO, ALGN & More

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The Q2 reporting cycle has just begun for the Medical sector (one of the 16 broad Zacks sectors within the Zacks Industry classification) and the quarterly performance has been healthy so far. Per the latest Earnings Preview, 9.1% of the companies in the Medical sector, constituting nearly 25.7% of the sector’s market capitalization, reported earnings till Jul 21. Earnings increased 4.3% year over year on 18.3% higher revenues. A total of 100% of the companies beat both earnings and revenues.

Though the scorecard so far reflects stable market condition within the United States, earnings estimates for Q2 indicate a sequential decline. Overall, second-quarter earnings for the Medical sector are expected to rise 16.7% on 16.3% sales increase. This compares with first-quarter earnings growth of 25.2% on 10.2% reported revenue growth.

Medical Device Q2 Performance

Integral to the broader Medical sector, medical device or Zacks-defined Medical Products companies’ collective business growth is likely to have significantly improved from the year-ago quarter’s severe COVID-induced business debacle.

The initial part of the Q2 reporting cycle has already depicted strong rebound in base sales volumes. This can be attributed to significant fall in COVID-19 cases across the United States and other developed markets through the months of the second quarter, banking on mass vaccination drive. Gradual lifting of restrictions and people getting back to pre-pandemic normalcy have resulted in significant rebound in non-COVID and elective legacy businesses of the medical device companies. Besides, vaccine and therapeutic makers have been riding on huge market adoption of their COVID-related healthcare support products and services.

More specifically, the second-quarter results of the majority of medical device stocks have shown accelerated base business growth. In the second quarter, Abbott’s (ABT - Free Report) underlying legacy diagnostics business continued to improve, driven by improved routine diagnostic testing levels and the continued rollout of Alinity platforms. 

On the flip side, although vaccine and therapeutic makers have been riding on huge market adoption of their COVID-related healthcare support products and services, diagnostic testing stocks have registered slowdown in demand for COVID-19 testing. For Quest Diagnostics (DGX - Free Report) , demand for COVID-19 testing slowed down in the second quarter, as expected, reflecting an industry wide trend.

The Zacks Medical Product sector currently carries a Zacks Sector Rank in the bottom 24% (192 of 252 industries).

Let’s take a look at four Medical Device players scheduled to announce results on Jul 28.

Thermo Fisher Scientific Inc. (TMO - Free Report) : Since the past two quarters, Thermo Fisher’s Analytical Instruments segment has been registering strong rebound despite the negative impact of COVID-19 in the form of muted demand on global economic slowdown. In the second quarter too, we expect this segment to have registered strong growth in Chromatography and Mass Spectrometry as well as the Materials and Structural Analysis businesses. Further, the end markets for chemical analysis have been gradually returning to growth. The company launched two new Thermo Scientific Orbitrap Exploris GC-Mass Spectrometers, which further extended the potential of Orbitrap franchise in toxicology and metabolomics in the second quarter. (Read more: Thermo Fisher to Report Q2 Earnings: What's in Store?)

The Zacks Consensus Estimate for second-quarterearnings per share is pegged at $5.51.  Revenues are expected to be $8.77 billion.

Thermo Fisher does not have 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. The company has an Earnings ESP of -0.54% and a Zacks Rank #3.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Align Technology, Inc. (ALGN - Free Report) : Align Technology has been registering impressive sales of Invisalign clear aligners and iTero imaging systems in the past few quarters. This momentum is likely to have continued during the second quarter courtesy of resumption of practices globally. In the teen segment, the company has been experiencing improvement in Invisalign volumes driven by increased Invisalign utilization and case submissions from Invisalign doctors owing to gradual recovery in businesses across all regions. These are likely to have contributed significantly to the second-quarter revenues. (Read more: Align Technology to Post Q2 Earnings: What's in Store?)

Align Technology has an Earnings ESP of +0.93% and a Zacks Rank #3.

Align Technology, Inc. Price and EPS Surprise

Align Technology, Inc. Price and EPS Surprise

Align Technology, Inc. price-eps-surprise | Align Technology, Inc. Quote

Hologic, Inc. (HOLX - Free Report) : With the normalization of economy and drop in COVID-19 case count, Hologic remains highly uncertain about the demand for its COVID-19 testing line. Like other players in the industry, over the past few months, the company has been witnessing declining sales of COVID-19 tests in the United States, following the mass vaccine rollout. This might have significantly affected the company’s COVID-19 testing revenues in the fiscal third quarter. (Read more: Hologic to Report Q3 Earnings: What's in the Cards?)

Hologic has an Earnings ESP of -0.12% and a Zacks Rank #4 (Sell).

Hologic, Inc. Price and EPS Surprise

Hologic, Inc. Price and EPS Surprise

Hologic, Inc. price-eps-surprise | Hologic, Inc. Quote

Integra LifeSciences (IART - Free Report) : Integra’s Codman Specialty Surgical segment’s results are expected to reflect growth 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 second-quarter 2021 results.

Integra has an Earnings ESP of 0.00% and a Zacks Rank #4.

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