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4 Medical Device Stocks Set to Beat This Earnings Season
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So far, the second-quarter reporting cycle has displayed an encouraging picture for the medical device companies within the broader Medical sector. Overall, the results of the majority of medical device stocks so far have shown accelerated base business growth after being hit by the pandemic.
Recovery in procedure volume as a result of pent-up demand is apparent across all non-elective sectors of the medical device space. This basically is the consequence of subdued consumer spending in the form of deferral of non-elective and non-COVID medical care through the earlier months of the pandemic.
Two Major Q2 Trends
The first half of the Q2 reporting cycle depicted strong rebound in base sales volumes with majority of the companies already reaching or approaching their pre-pandemic business level. 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.
However, a contrasting trend is also evident. Although vaccine and therapeutic makers are still riding on huge market adoption of their COVID-19-related healthcare-support products and services, there has been significant reduction in demand for COVID-19 testing due to a drop in new cases.
Q2 Scorecard Thus Far
Thermo Fisher Scientific (TMO - Free Report) , Boston Scientific (BSX - Free Report) , LabCorp (LH - Free Report) and Quest Diagnostics are a few companies whose base-business performance registered strong recovery rate.
For Thermo Fisher, its diagnostics and healthcare business grew in the high teens during the quarter with customer demand in base business approaching pre-pandemic levels. Particularly, the company’s immunodiagnostics and transplant diagnostics businesses delivered outstanding growth.
For Boston Scientific, second-quarter organic sales grew faster-than-expected compared to the 2019 comparable period (pre-pandemic). Six out of the company’s seven businesses grew double digits organically versus 2019 and five of its business units grew faster than their respective markets.
For LabCorp, despite significant sinking of COVID-related testing revenues through the months of the second quarter, the compound annual growth rate for the base business revenueswas 4.5% relative to the pre-pandemic comparable primarily due to organic growth.
For Quest Diagnostics too, compared to second-quarter 2019 baseline, total base testing volumes increased. This is the first quarter since 2019 that organic base testing revenues grew. The growth was driven by contributions from new hospital lab management contracts as well as people returning to the healthcare system.
At the same time, the company noticed slower demand for COVID-19 testing in the second quarter, reflecting an industry-wide trend. Quest Diagnostics performed an average of 57,000 COVID-19 molecular tests in the second quarter, well below its current capacity of approximately 300,000 tests per day.
Per the latest Earnings Preview, 29.1% of the companies in the broader Medical sector, constituting nearly 50.5% of the sector’s market capitalization, have already reported earnings. Of these, 93.8% beat both earnings and revenue estimates. Earnings increased 12.2% year over year on 20.2% higher revenues. Overall, second-quarter earnings for the Medical sector are expected to rise 23.2% on 18.4% sales increase.
Zacks Methodology
Given the high degree of diversity in the Medical Products industry, finding the right stocks with the potential to beat estimates might be quite a daunting task.
However, our proprietary Zacks methodology makes this fairly simple.
Our research shows that for stocks with this combination, chances of an earnings surprise are as high as 70%.
Earnings ESP provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here we present four stocks that are expected to beat earnings estimates in this reporting cycle.
Henry Schein, Inc. (HSIC - Free Report) : Henry Schein’s medical business is again expected to have seen demand for its Personal Protective Equipment and COVID-related products amid the pandemic. However, lower pharmaceutical sales related to fewer patient office visits and lower COVID-19 testing demand might have impacted the medical business in the fiscal second quarter.
The combination Henry Schein’s Earnings ESP of +0.45% and a Zacks Rank #2 raises the possibility of an earnings surprise in the to-be-reported quarter.
The company is scheduled to release results for the second quarter of 2021 on Aug 3, before market open.
DENTSPLY SIRONA Inc. (XRAY - Free Report) : The company might report better-than-expected second quarter results, given the ongoing improvement in sales trends on reopening of dental offices and rise in patient visits. Its Consumables and Technologies & Equipment businesses are likely toreport year-over-year growth on strong recovery in global dental demand.
The company is scheduled to release second-quarter 2021 results on Aug 5.
DENTSPLY SIRONA has an Earnings ESP of +6.77% and a Zacks Rank #2.
Globus Medical, Inc. (GMED - Free Report) : Despite a soft pandemic-led business scenario, the company’s spine business is likely to have gained significant market share. Pull-through from robotics, contributions from product introductions, a resurgence in biologics business and competitive recruiting are expected to have acted as factors driving growth in Q2.
The company is scheduled to release second-quarter 2021 results on Aug 4.
Globus Medical has an Earnings ESP of +2.51% and a Zacks Rank #2.
AmerisourceBergen Corporation : Banking on improved market conditions, the company is expected to report strong revenue growth in third-quarter fiscal 2021 in both the Pharmaceutical Distribution Services segment and Other which includes Global commercialization services and animal health group of businesses. Expanding patient base in COVID-19 therapies and growth in some of its higher margin businesses such as World Courier and MWI Animal Health are major growth drivers.
The company is scheduled to release third-quarter fiscal 2021 results on Aug 4.
AmerisourceBergen has an Earnings ESP of +1.58% and a Zacks Rank #3.
AmerisourceBergen Corporation Price and EPS Surprise
Image: Bigstock
4 Medical Device Stocks Set to Beat This Earnings Season
So far, the second-quarter reporting cycle has displayed an encouraging picture for the medical device companies within the broader Medical sector. Overall, the results of the majority of medical device stocks so far have shown accelerated base business growth after being hit by the pandemic.
Recovery in procedure volume as a result of pent-up demand is apparent across all non-elective sectors of the medical device space. This basically is the consequence of subdued consumer spending in the form of deferral of non-elective and non-COVID medical care through the earlier months of the pandemic.
Two Major Q2 Trends
The first half of the Q2 reporting cycle depicted strong rebound in base sales volumes with majority of the companies already reaching or approaching their pre-pandemic business level. 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.
However, a contrasting trend is also evident. Although vaccine and therapeutic makers are still riding on huge market adoption of their COVID-19-related healthcare-support products and services, there has been significant reduction in demand for COVID-19 testing due to a drop in new cases.
Q2 Scorecard Thus Far
Thermo Fisher Scientific (TMO - Free Report) , Boston Scientific (BSX - Free Report) , LabCorp (LH - Free Report) and Quest Diagnostics are a few companies whose base-business performance registered strong recovery rate.
For Thermo Fisher, its diagnostics and healthcare business grew in the high teens during the quarter with customer demand in base business approaching pre-pandemic levels. Particularly, the company’s immunodiagnostics and transplant diagnostics businesses delivered outstanding growth.
For Boston Scientific, second-quarter organic sales grew faster-than-expected compared to the 2019 comparable period (pre-pandemic). Six out of the company’s seven businesses grew double digits organically versus 2019 and five of its business units grew faster than their respective markets.
For LabCorp, despite significant sinking of COVID-related testing revenues through the months of the second quarter, the compound annual growth rate for the base business revenueswas 4.5% relative to the pre-pandemic comparable primarily due to organic growth.
For Quest Diagnostics too, compared to second-quarter 2019 baseline, total base testing volumes increased. This is the first quarter since 2019 that organic base testing revenues grew. The growth was driven by contributions from new hospital lab management contracts as well as people returning to the healthcare system.
At the same time, the company noticed slower demand for COVID-19 testing in the second quarter, reflecting an industry-wide trend. Quest Diagnostics performed an average of 57,000 COVID-19 molecular tests in the second quarter, well below its current capacity of approximately 300,000 tests per day.
Per the latest Earnings Preview, 29.1% of the companies in the broader Medical sector, constituting nearly 50.5% of the sector’s market capitalization, have already reported earnings. Of these, 93.8% beat both earnings and revenue estimates. Earnings increased 12.2% year over year on 20.2% higher revenues. Overall, second-quarter earnings for the Medical sector are expected to rise 23.2% on 18.4% sales increase.
Zacks Methodology
Given the high degree of diversity in the Medical Products industry, finding the right stocks with the potential to beat estimates might be quite a daunting task.
However, our proprietary Zacks methodology makes this fairly simple.
We are focusing on stocks that have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with this combination, chances of an earnings surprise are as high as 70%.
Earnings ESP provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here we present four stocks that are expected to beat earnings estimates in this reporting cycle.
Henry Schein, Inc. (HSIC - Free Report) : Henry Schein’s medical business is again expected to have seen demand for its Personal Protective Equipment and COVID-related products amid the pandemic. However, lower pharmaceutical sales related to fewer patient office visits and lower COVID-19 testing demand might have impacted the medical business in the fiscal second quarter.
(Read more: What's in Store for Henry Schein in Q2 Earnings?)
The combination Henry Schein’s Earnings ESP of +0.45% and a Zacks Rank #2 raises the possibility of an earnings surprise in the to-be-reported quarter.
The company is scheduled to release results for the second quarter of 2021 on Aug 3, before market open.
Henry Schein, Inc. Price and EPS Surprise
Henry Schein, Inc. price-eps-surprise | Henry Schein, Inc. Quote
DENTSPLY SIRONA Inc. (XRAY - Free Report) : The company might report better-than-expected second quarter results, given the ongoing improvement in sales trends on reopening of dental offices and rise in patient visits. Its Consumables and Technologies & Equipment businesses are likely toreport year-over-year growth on strong recovery in global dental demand.
The company is scheduled to release second-quarter 2021 results on Aug 5.
DENTSPLY SIRONA has an Earnings ESP of +6.77% and a Zacks Rank #2.
DENTSPLY SIRONA Inc. Price and EPS Surprise
DENTSPLY SIRONA Inc. price-eps-surprise | DENTSPLY SIRONA Inc. Quote
Globus Medical, Inc. (GMED - Free Report) : Despite a soft pandemic-led business scenario, the company’s spine business is likely to have gained significant market share. Pull-through from robotics, contributions from product introductions, a resurgence in biologics business and competitive recruiting are expected to have acted as factors driving growth in Q2.
The company is scheduled to release second-quarter 2021 results on Aug 4.
Globus Medical has an Earnings ESP of +2.51% and a Zacks Rank #2.
Globus Medical, Inc. Price and EPS Surprise
Globus Medical, Inc. price-eps-surprise | Globus Medical, Inc. Quote
AmerisourceBergen Corporation : Banking on improved market conditions, the company is expected to report strong revenue growth in third-quarter fiscal 2021 in both the Pharmaceutical Distribution Services segment and Other which includes Global commercialization services and animal health group of businesses. Expanding patient base in COVID-19 therapies and growth in some of its higher margin businesses such as World Courier and MWI Animal Health are major growth drivers.
The company is scheduled to release third-quarter fiscal 2021 results on Aug 4.
AmerisourceBergen has an Earnings ESP of +1.58% and a Zacks Rank #3.
AmerisourceBergen Corporation Price and EPS Surprise
AmerisourceBergen Corporation price-eps-surprise | AmerisourceBergen Corporation Quote