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What's in Store for These 5 Medical Device Stocks in Q1 Earnings?
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The first-quarter earnings season is almost at its middle, with several medical device companies scheduled to report this week. Per the latest Earnings Trends, revenues for companies in the Medical sector registered a modest growth.
Although earnings growth for these companies was minimal, each company beat market expectations. The revenue growth reflects existing demand for medical products and services, coupled with improved pricing. However, higher costs and interest expenses are hurting earnings, leading to lower growth than sales.
Going by the broader Medical sector’s scorecard, 16.7% of the companies in the Medical sector, constituting 32.6% of the sector’s market capitalization, reported earnings till Apr 24. The bottom line rose 0.7% year over year on 3.6% higher revenues. However, 100% of these companies beat on earnings and 70% beat on revenues.
Overall, first-quarter earnings of the Medical sector are expected to have declined 7.6% despite 6.3% growth in revenues. This compares with the fourth-quarter earnings decline of 17.1% on revenue growth of 7%.
Potential Factors Driving Q1 Medical Earnings Season
A rise in consumer spending, and backlog in patient diagnosis and treatment created over the past few years due to COVID-19, are key factors that are likely to have driven the demand for products and services of the medical device companies. Meanwhile, the integration of artificial intelligence (AI) in various medical products is likely to have supported growth in sales, driven by better results. AI is also helping to diagnose diseases that were previously complex or not possible.
However, the ongoing macroeconomic issues are likely to have acted as headwinds for medical device companies during the quarter. Supply-chain bottlenecks continue in different parts of the globe, leading to higher costs for labor and raw materials, as well as freight and a shortage of healthcare workers.
Meanwhile, slower-than-expected growth for U.S. businesses and higher-than-expected inflation during the first quarter are likely to have led to delays in easing interest rates. Higher interest rates are anticipated to have put pressure on net margin. Several medical device companies have high capital expenditures to drive the adoption of the latest technologies, which might have led to higher interest outgo during the first quarter.
Also, diagnostic testing companies have been witnessing a severe year-over-year decline in testing demand, compared to strong demand in the year-ago period for COVID-19 testing products.
Stryker: During the first quarter, Stryker’s MedSurg and Neurotechnology segment is likely to have witnessed substantial sales growth, led by strong performances in the United States, Canada, Australia, Europe, Japan and most emerging markets. Continued procedural growth, strong uptake of the Insignia Hip Stem and robust Mako sales are likely to have been the key drivers for this Orthopaedics & Spine segment’s top line during the quarter. However, ongoing pressure in China due to volume-based procurement policy is expected to have partially offset the international growth.
Meanwhile, Stryker is working toward alleviating the ongoing inflationary pressure. The company continues to recognize improved pricing and reduced cost pressure in the past couple of quarters. This is likely to have benefited its gross margin during the to-be-reported quarter.
The Zacks Consensus Estimate for first-quarter total revenues is pegged at $5.06 billion.
The consensus mark for adjusted earnings is pinned at $2.35 per share.
During the first quarter, the company’s shares rose 19.5% compared with the industry’s 6.7% growth.
Per our proven model, a stock with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating on earnings. However, this is not the case, as you can see below.
Stryker has an Earnings ESP of -0.78% and a Zacks Rank of 3 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
GE Healthcare: The company is expected to report strong organic revenue growth during the soon-to-be-reported quarter, banking on balanced segmental performance, driven by consistent new product introductions and growing customer demand. The first quarter might have witnessed greater backlog fulfillment as supply challenges are gradually easing out. Further, improved pricing and successful commercial execution might have added to the top line. Continued investments to increase capacity by healthcare providers across the globe, coupled with higher surgical procedures, are likely to have boosted Imaging sales in the first quarter. Similar to the fourth quarter, GEHC is expected to have benefited from tools-side production for highly constrained products in the first quarter of 2024.
However, a strong commercial performance in the first quarter might have been primarily dented by a challenging macroeconomic environment and currency headwinds.
The Zacks Consensus Estimate for first-quarter total revenues is pegged at $4.81 billion, implying a 2.2% rise from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at 90 cents per share, indicating a 5.9% increase from the year-ago quarter’s reported figure.
During the first quarter, the stock rose 17.6% compared with the industry’s 3.1% growth.
GEHC has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.
Ecolab: Per management, the company’s two platform innovations — Ecolab Science Certified and Ecolab Water for Climate — have been progressing well with a few big customers. We are optimistic about the continued strength in Ecolab’s Water business and expect it to have significantly boosted the company’s first-quarter revenues. Strong performance of the Institutional unit, especially in China, is likely to have aided sales. The Specialty business is projected to have witnessed an improvement on both the quick serve restaurants and the food retail side. Ecolab’s segmental revenues are also likely to have benefited from new business wins.
However, the performance of the Paper business is likely to have been marred during the first quarter by soft industry demand. The Life Sciences market is also anticipated to have been soft.
The Zacks Consensus Estimate for the company’s first-quarter total revenues is pegged at $3.75 billion, indicating a 5% improvement from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at $1.33 per share, indicating a 51.1% increase from the year-ago quarter’s reported actuals.
Meanwhile, during the first quarter, shares of the company rallied 16.4% compared with the industry’s 10.4% growth.
Ecolab has an Earnings ESP of -0.82% and a Zacks Rank #2 at present.
Inari Medical: Continued strong demand for its products is likely to have driven the top line for Inari Medical during the soon-to-be reported quarter. International markets are likely to have aided top-line growth with increased adoption in Western Europe, Latin America Canada and the Asia-Pacific. Moreover, the company’s progress in both China and Japan is likely to have added new customers during the first quarter, thereby boosting revenues further.
The company had launched six products during the second half of 2023. Among them, REVCORE, InThrill and ProTrieve have shown good initial traction since their launch and management remains optimistic about direct incremental revenue opportunities from these products. This is likely to be reflected in the first-quarter results.
However, gross margin is likely to have been under pressure due to rising cost of material as geopolitical and inflationary challenges continue.
The Zacks Consensus Estimate for the company’s first-quarter total revenues is pegged at $138.3 million, implying a 19.1% improvement from the prior-year quarter’s reported figure. The consensus mark for revenues is pegged at a loss of 11 cents per share, 175% wider from the year-ago quarter’s reported loss.
Meanwhile, during the first quarter, shares of the company lost 26.1% against the industry’s 8.9% growth.
Inari Medical has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.
Merit Medical: Revenue growth in the fourth quarter was driven by strong organic growth, reflecting particular strength in Peripheral Intervention (PI), Custom Procedural Solutions (CPS) and original equipment manufacturer (OEM) product categories, and relatively balanced contributions from both the U.S. and international markets. This trend is likely to have continued in the first quarter, driving year-over-year growth in revenues.
Merit Medical received an approval for its SCOUT MD Surgical Guidance System in February. The company may provide an update on its launch activities on its first quarter earnings call.
However, rising operating costs that lay pressure on the adjusted operating margin do not bode well. The current challenging global macro environment also raises our apprehension for the bottom line.
The Zacks Consensus Estimate for the company’s first-quarter total revenues is pegged at $315.9 million, implying 6.2% growth from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at 71 cents per share, indicating a 10.9% improvement from the year-ago quarter’s reported actuals.
Meanwhile, during the first quarter, shares of the company lost 0.3% against the industry’s 7.2% growth.
Merit Medical has an Earnings ESP of -0.40% and a Zacks Rank #3 at present.
Merit Medical Systems, Inc. Price and EPS Surprise
Image: Bigstock
What's in Store for These 5 Medical Device Stocks in Q1 Earnings?
The first-quarter earnings season is almost at its middle, with several medical device companies scheduled to report this week. Per the latest Earnings Trends, revenues for companies in the Medical sector registered a modest growth.
Although earnings growth for these companies was minimal, each company beat market expectations. The revenue growth reflects existing demand for medical products and services, coupled with improved pricing. However, higher costs and interest expenses are hurting earnings, leading to lower growth than sales.
Going by the broader Medical sector’s scorecard, 16.7% of the companies in the Medical sector, constituting 32.6% of the sector’s market capitalization, reported earnings till Apr 24. The bottom line rose 0.7% year over year on 3.6% higher revenues. However, 100% of these companies beat on earnings and 70% beat on revenues.
Overall, first-quarter earnings of the Medical sector are expected to have declined 7.6% despite 6.3% growth in revenues. This compares with the fourth-quarter earnings decline of 17.1% on revenue growth of 7%.
Some major industry players like Stryker (SYK - Free Report) , GE Healthcare (GEHC - Free Report) , Ecolab (ECL - Free Report) , Inari Medical (NARI - Free Report) and Merit Medical Systems (MMSI - Free Report) are set to report their quarterly results tomorrow.
Potential Factors Driving Q1 Medical Earnings Season
A rise in consumer spending, and backlog in patient diagnosis and treatment created over the past few years due to COVID-19, are key factors that are likely to have driven the demand for products and services of the medical device companies. Meanwhile, the integration of artificial intelligence (AI) in various medical products is likely to have supported growth in sales, driven by better results. AI is also helping to diagnose diseases that were previously complex or not possible.
However, the ongoing macroeconomic issues are likely to have acted as headwinds for medical device companies during the quarter. Supply-chain bottlenecks continue in different parts of the globe, leading to higher costs for labor and raw materials, as well as freight and a shortage of healthcare workers.
Meanwhile, slower-than-expected growth for U.S. businesses and higher-than-expected inflation during the first quarter are likely to have led to delays in easing interest rates. Higher interest rates are anticipated to have put pressure on net margin. Several medical device companies have high capital expenditures to drive the adoption of the latest technologies, which might have led to higher interest outgo during the first quarter.
Also, diagnostic testing companies have been witnessing a severe year-over-year decline in testing demand, compared to strong demand in the year-ago period for COVID-19 testing products.
Stryker: During the first quarter, Stryker’s MedSurg and Neurotechnology segment is likely to have witnessed substantial sales growth, led by strong performances in the United States, Canada, Australia, Europe, Japan and most emerging markets. Continued procedural growth, strong uptake of the Insignia Hip Stem and robust Mako sales are likely to have been the key drivers for this Orthopaedics & Spine segment’s top line during the quarter. However, ongoing pressure in China due to volume-based procurement policy is expected to have partially offset the international growth.
Meanwhile, Stryker is working toward alleviating the ongoing inflationary pressure. The company continues to recognize improved pricing and reduced cost pressure in the past couple of quarters. This is likely to have benefited its gross margin during the to-be-reported quarter.
(Read more: Ongoing Procedural Growth May Aid Stryker's Q1 Earnings)
The Zacks Consensus Estimate for first-quarter total revenues is pegged at $5.06 billion.
The consensus mark for adjusted earnings is pinned at $2.35 per share.
During the first quarter, the company’s shares rose 19.5% compared with the industry’s 6.7% growth.
Per our proven model, a stock with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating on earnings. However, this is not the case, as you can see below.
Stryker has an Earnings ESP of -0.78% and a Zacks Rank of 3 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stryker Corporation Price and EPS Surprise
Stryker Corporation price-eps-surprise | Stryker Corporation Quote
GE Healthcare: The company is expected to report strong organic revenue growth during the soon-to-be-reported quarter, banking on balanced segmental performance, driven by consistent new product introductions and growing customer demand. The first quarter might have witnessed greater backlog fulfillment as supply challenges are gradually easing out. Further, improved pricing and successful commercial execution might have added to the top line. Continued investments to increase capacity by healthcare providers across the globe, coupled with higher surgical procedures, are likely to have boosted Imaging sales in the first quarter. Similar to the fourth quarter, GEHC is expected to have benefited from tools-side production for highly constrained products in the first quarter of 2024.
However, a strong commercial performance in the first quarter might have been primarily dented by a challenging macroeconomic environment and currency headwinds.
The Zacks Consensus Estimate for first-quarter total revenues is pegged at $4.81 billion, implying a 2.2% rise from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at 90 cents per share, indicating a 5.9% increase from the year-ago quarter’s reported figure.
During the first quarter, the stock rose 17.6% compared with the industry’s 3.1% growth.
GEHC has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.
(Read more: Rising Demand Likely to Aid GE HealthCare's Q1 Earnings)
GE HealthCare Technologies Inc. Price and EPS Surprise
GE HealthCare Technologies Inc. price-eps-surprise | GE HealthCare Technologies Inc. Quote
Ecolab: Per management, the company’s two platform innovations — Ecolab Science Certified and Ecolab Water for Climate — have been progressing well with a few big customers. We are optimistic about the continued strength in Ecolab’s Water business and expect it to have significantly boosted the company’s first-quarter revenues. Strong performance of the Institutional unit, especially in China, is likely to have aided sales. The Specialty business is projected to have witnessed an improvement on both the quick serve restaurants and the food retail side. Ecolab’s segmental revenues are also likely to have benefited from new business wins.
However, the performance of the Paper business is likely to have been marred during the first quarter by soft industry demand. The Life Sciences market is also anticipated to have been soft.
The Zacks Consensus Estimate for the company’s first-quarter total revenues is pegged at $3.75 billion, indicating a 5% improvement from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at $1.33 per share, indicating a 51.1% increase from the year-ago quarter’s reported actuals.
Meanwhile, during the first quarter, shares of the company rallied 16.4% compared with the industry’s 10.4% growth.
Ecolab has an Earnings ESP of -0.82% and a Zacks Rank #2 at present.
(Read more: Factors Setting the Tone for Ecolab's Q1 Earnings)
Ecolab Inc. Price and EPS Surprise
Ecolab Inc. price-eps-surprise | Ecolab Inc. Quote
Inari Medical: Continued strong demand for its products is likely to have driven the top line for Inari Medical during the soon-to-be reported quarter. International markets are likely to have aided top-line growth with increased adoption in Western Europe, Latin America Canada and the Asia-Pacific. Moreover, the company’s progress in both China and Japan is likely to have added new customers during the first quarter, thereby boosting revenues further.
The company had launched six products during the second half of 2023. Among them, REVCORE, InThrill and ProTrieve have shown good initial traction since their launch and management remains optimistic about direct incremental revenue opportunities from these products. This is likely to be reflected in the first-quarter results.
However, gross margin is likely to have been under pressure due to rising cost of material as geopolitical and inflationary challenges continue.
The Zacks Consensus Estimate for the company’s first-quarter total revenues is pegged at $138.3 million, implying a 19.1% improvement from the prior-year quarter’s reported figure. The consensus mark for revenues is pegged at a loss of 11 cents per share, 175% wider from the year-ago quarter’s reported loss.
Meanwhile, during the first quarter, shares of the company lost 26.1% against the industry’s 8.9% growth.
Inari Medical has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.
Inari Medical, Inc. Price and EPS Surprise
Inari Medical, Inc. price-eps-surprise | Inari Medical, Inc. Quote
Merit Medical: Revenue growth in the fourth quarter was driven by strong organic growth, reflecting particular strength in Peripheral Intervention (PI), Custom Procedural Solutions (CPS) and original equipment manufacturer (OEM) product categories, and relatively balanced contributions from both the U.S. and international markets. This trend is likely to have continued in the first quarter, driving year-over-year growth in revenues.
Merit Medical received an approval for its SCOUT MD Surgical Guidance System in February. The company may provide an update on its launch activities on its first quarter earnings call.
However, rising operating costs that lay pressure on the adjusted operating margin do not bode well. The current challenging global macro environment also raises our apprehension for the bottom line.
The Zacks Consensus Estimate for the company’s first-quarter total revenues is pegged at $315.9 million, implying 6.2% growth from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at 71 cents per share, indicating a 10.9% improvement from the year-ago quarter’s reported actuals.
Meanwhile, during the first quarter, shares of the company lost 0.3% against the industry’s 7.2% growth.
Merit Medical has an Earnings ESP of -0.40% and a Zacks Rank #3 at present.
Merit Medical Systems, Inc. Price and EPS Surprise
Merit Medical Systems, Inc. price-eps-surprise | Merit Medical Systems, Inc. Quote