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Medical Product Stocks' Earnings May 5 Roster: MCK, CAH & PODD

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So far, this reporting cycle for the Medical sector (one of the 16 broad Zacks sectors within the Zacks Industry classification) has been impressive. The quarterly performance of the majority of medical product stocks has shown accelerated base business growth through the months of the first quarter of 2022 over comparable 2021 numbers, given the drop in severity of COVID-19 infections (despite the emergence of new virus variants). As per latest trends, the Medical sector’s earnings growth is expected to be one of the strongest among the nine top-performing sectors.

Per the latest Earnings Preview, 7% of the companies in the Medical sector, constituting nearly 27.6% of the sector’s market capitalization, have already reported earnings numbers. Earnings increased 8.4% year over year on 13.5% higher revenues. A total of 75% of the companies witnessed their earnings as well as revenues beat the Zacks Consensus Estimate.

The scorecard so far reflects stable market conditions within the United States on the gradual reopening of the economy even amid the rise of the new variant-led COVID-19 cases through the months of the first quarter. Overall, first-quarter earnings for the Medical sector are expected to rise 10.3% on 13.3% sales increase. This compares with fourth-quarter 2021 earnings growth of 27.8% on 14.3% reported revenue growth.

Medical Product Quarterly Synopsis

Integral to the broader Medical sector, Zacks-defined Medical Products companies’ collective business growth is likely to have improved from the last-reported quarter’s pandemic-induced challenges. However, continued emergence of more contagious COVID-19 variants like Omicron and XE across both the domestic and international markets is raising apprehensions. Adding to the woes are the ongoing staffing shortages and supply chain constraints, which are plaguing the broader Medical sector.

The companies within this space saw the second half of the Q1 reporting cycle deliver a solid rebound in base sales volumes, with some even reaching their pre-pandemic legacy business levels. This can primarily be attributed to a significant reduction in COVID-led fatality across the United States and other developed markets. With the gradual lifting of restrictions and people getting back to pre-pandemic normalcy, there has been a significant rebound in non-COVID and elective legacy businesses of the medical product companies. Although companies are witnessing sequential recovery in their base businesses, the overall trend improvement is yet to reach the pre-COVID level.

While players in the Medical Products space are registering improving non-COVID business trends, COVID-related product sales are taking a beating due to lower testing demand. Although infections are still on the rise, the testing demand is well below the comparable 2021 and 2020 levels. This is likely to have resulted in lower COVID revenues and higher revenues from non-COVID businesses. However, supply chain constraints are likely to weigh on the overall quarterly performance.

More specifically, in the current reporting cycle, NextGen Healthcare, Inc. (NXGN - Free Report) , which is not involved in diagnostics, recently announced preliminary financial results for fourth-quarter fiscal 2022. NextGen expects a solid year-over-year improvement in quarterly revenues. NXGN also expects record levels of preliminary bookings for the fiscal fourth quarter.

On the other hand, Quidel Corporation (QDEL - Free Report) is expected to have recorded COVID-19 revenues of around $836 million, per its preliminary results. Quidel also confirmed selling around 113 million QuickVue COVID-19 antigen tests and around 12 million Sofia SARS antigen tests during the first quarter. Per the same announcement, Quidel has been registering strong demand for its QuickVue At-Home OTC COVID-19 test. This is expected to have driven up shipments of its SARS tests.

Let’s take a look at three Medical Products players scheduled to announce results on May 5.

McKesson Corporation (MCK - Free Report) : McKesson’s U.S. Pharmaceutical and Specialty Solutions segment might have acted as a key growth driver in fourth-quarter fiscal 2022. The segment may have benefited from market growth and higher volumes from retail national account customers in the to-be-reported quarter. However, branded to generic conversions might have weighed on the segment’s performance. Nonetheless, the company’s broad spectrum of specialty biopharmaceutical providers and manufacturers is expected to have contributed to the fiscal fourth-quarter performance. (Read more: McKesson to Report Q4 Earnings: What's in the Cards?)

The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pegged at $6.06 per share, implying an improvement of 20% from the prior-year period’s reported number. Revenues are expected to be $63.72 billion, implying an uptick of 7.7% from the prior-year period’s reported number.

McKesson Corporation Price and EPS Surprise

McKesson Corporation Price and EPS Surprise

McKesson Corporation price-eps-surprise | McKesson Corporation Quote

McKesson does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — which increases the odds of an earnings beat. MCK has an Earnings ESP of -0.44% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

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

Cardinal Health, Inc. (CAH - Free Report) : Cardinal Health’s pharmaceutical revenues had registered strong growth in the second quarter of fiscal 2022, reflecting branded pharmaceutical sales growth from Pharmaceutical Distribution and Specialty Solutions customers. This momentum is likely to have continued in the fiscal third quarter.

Per the fiscal second-quarter 2022 earnings call, management continued to anticipate a recovery in generic volumes to pre-COVID levels by the end of the calendar year. During the last-reported quarter, the segment witnessed double-digit contributions from its growth businesses — Specialty, Nuclear and Outcomes. The company's to-be-reported quarter's results are likely to have gained from this trend. (Read more: Cardinal Health to Post Q3 Earnings: What's in Store?)

The Zacks Consensus Estimate for Cardinal Health’s fiscal third-quarter earnings is pegged at $1.54 per share, implying an improvement of 0.7% from the prior-year period’s reported number. Revenues are expected to be $43 billion, implying an uptick of 9.5% from the prior-year period’s reported number.

Cardinal Health, Inc. Price and EPS Surprise

Cardinal Health, Inc. Price and EPS Surprise

Cardinal Health, Inc. price-eps-surprise | Cardinal Health, Inc. Quote

CAH has an Earnings ESP of -1.82% and a Zacks Rank #4 (Sell).

Insulet Corporation (PODD - Free Report) : Insulet has been witnessing higher adoption of its Omnipod system across both its domestic and international markets over the past few months. This momentum is likely to have continued in the first quarter of 2022 on the back of sustained demand for PODD’s Omnipod product line, and thus is likely to have significantly driven up the company’s top line. In January, Insulet received the FDA’s clearance for its Omnipod 5 Automated Insulin Delivery System (Omnipod 5) for individuals aged six years and above who are suffering from type 1 diabetes.

Insulet, in the same press release, had confirmed that Omnipod 5 would be launched through the pharmacy channel. This raises optimism regarding Insulet’s first-quarter 2022 performance.

The Zacks Consensus Estimate for Insulet’s first-quarter earnings is pegged at 23 cents per share. Revenues are expected to be $286.2 million, implying a surge of 13.5% from the prior-year period’s reported number.

PODD has an Earnings ESP of -22.38% and a Zacks Rank #3.

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