The first-quarter reporting cycle has just begun for the
Medical sector (one of the 16 broad Zacks sectors within the Zacks Industry classification). Quarterly performances have been discouraging so far, with companies still recovering from the inflationary pressures, supply chain challenges and labor shortages. Per the latest trends, the Medical sector is one of the spaces witnessing negative estimate revisions among 10 other sectors in the reporting cycle.
Earnings Preview states that 8.8% of the companies in the Medical sector, constituting nearly 27.5% of the sector’s market capitalization, reported earnings until Apr 19. Earnings decreased 2.4% year over year despite 9.8% higher revenues.
The scorecard so far reflects uncertain market conditions within the United States, with the majority of the players in the Medical sector reeling under an uncertain macroeconomic environment for a while. With economies back to normal and product demand continuing to improve, the majority of the players in the Medical sector have been posting encouraging quarterly results.
However, inflationary pressure, labor shortage, supply-chain disruption and interest-rate hikes are expected to have hurt industry players' performance in the quarter ending March 2023. Overall, first-quarter earnings of the Medical sector are expected to decline 22.4% despite a 1% sales increase. This compares with fourth-quarter earnings decline of 6.7% despite 4.9% reported revenue growth.
Medical Device Quarterly Synopsis
Integral to the broader Medical sector, the Medical Device or Zacks-defined Medical Products companies’ collective business growth is likely to have improved from the comparable prior-year period’s performance. This year, various Medical Device players have witnessed a rising number of collaborations, some notable ones with respect to artificial intelligence (AI), to expand their product offerings. A notable example in this respect is
Medtronic plc ( MDT Quick Quote MDT - Free Report) . In March, MDT announced Cosmo Pharmaceuticals’ strategy to integrate NVIDIA's AI technologies into Medtronic’s GI Genius intelligent endoscopy module. Medtronic’s latest partnership with Nvidia and Cosmo Pharmaceuticals provides the GI Genius AI Access platform intended to boost AI innovation for healthcare.
However, continued supply chain-induced constraints, inflationary pressure and an overall unstable macroeconomic business environment are likely to have dampened the overall recovery of the Medical Device players following the prior year’s pandemic-induced challenges and the global shortage of semiconductor chips.
Although companies have been gradually going back to their normal operations over the past few months, this might still not have been sufficient to boost the growth process in the March quarter amid a tough business climate. These factors are likely to have significantly weighed on the performances of several businesses in the Medical Device sector during the first quarter.
Overall, the January-March months were marked by strength in product portfolios and solid customer adoption of products. Medical Device companies like
West Pharmaceutical Services, Inc. ( WST Quick Quote WST - Free Report) , DexCom, Inc. ( DXCM Quick Quote DXCM - Free Report) and Baxter International Inc. ( BAX Quick Quote BAX - Free Report) are likely to have been positively impacted by the tailwinds discussed above, despite encountering turbulence on the macroeconomic front.
Let’s observe the status of these three Medical Device players, scheduled to announce results on Apr 27.
West Pharmaceutical’s Proprietary Products was an important contributor to the company’s top-line growth in the fourth quarter of 2022. The segment is also likely to have exhibited sustained strength in the first quarter of 2023. WST has been witnessing a strong uptake of high-value products (HVP) components, which include Westar and NovaPure offerings. This trend is likely to have continued in the quarter to be reported. However, delays in expansion projects, customer delivery timing and mix-shift-related productivity impacts might have hurt HVP’s sales growth. (Read more: What's in Store for West Pharmaceutical in Q1 Earnings?)
The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at $1.67 per share. Revenues are expected to be $697.3 million.
Our projection of adjusted earnings per share is currently pegged at $1.64. The first-quarter revenues are currently pegged at $700.6 million.
West Pharmaceutical has 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. WST has an Earnings ESP of +9.47% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter. DexCom’s first-quarter 2023 revenues are likely to have been aided by the continued increase in volume. This surge can be attributed to new patients across all channels and rising global awareness about the benefits of its real-time Continuous Glucose Monitoring. Potential robust contributions from the Sensor segment and domestic and international revenue growth are likely to be the key catalysts for the company’s first-quarter results. (Read more: DexCom to Report Q1 Earnings: What's in the Cards?)
The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at 15 cents per share. Revenues are expected to be $719.9 million.
Our projection of adjusted earnings per share is currently pegged at 15 cents, in line with the Zacks Consensus Estimate. The first-quarter revenues are currently pegged at $719.1 million.
DXCM has an Earnings ESP of 0.00% and a Zacks Rank #2. You can see
the complete list of today’s Zacks #1 Rank stocks here. Baxter expects sales to decline 3% on a reported basis and 1% at constant currency basis for first-quarter 2023. For the same period, adjusted earnings per share are expected to be between 46 cents and 50 cents. The earnings outlook for the quarter reflects inflationary pressure, rising interest expenses and higher tax rates. Robust demand for Baxter’s broad multi-chamber product offering is likely to have continued in the first quarter, driving sales of its Clinical Nutrition segment. Moreover, a continued rise in surgical volume and elective surgical procedures might have fueled strong growth in Advanced Surgery’s sales. (Read more: Baxter to Post Q1 Earnings: What's in the Offing?)
The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at 48 cents per share. Revenues are expected to be $3.60 billion.
Our projection of adjusted earnings per share is currently pegged at 50 cents. First-quarter revenues are currently pegged at $3.59 billion.
BAX has an Earnings ESP of 0.00% and a Zacks Rank #3.
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