The Q3 earnings season has started to pick up steam and as per our latest Earnings Trends report, as of Oct 21, 116 S&P 500 members (23.2% of the total index) have reported their quarterly numbers. So far, the earnings reports demonstrated quite an optimistic trend and if this continues till the end, this quarter will finally be successful in showing positive earnings growth for the first time after five back-to-back quarters of earnings declines for the S&P 500 index.
Total earnings are up 3.3% year over year for these 116 S&P 500 members on a beat ratio of 80.2%. Revenues have increased 1.8%, with 62.9% of the companies beating expectations.
With the majority of earnings yet to be released, the ongoing week with huge earnings announcements lined up, will be crucial to decide whether this Q3 will genuinely prove itself to be a trend-changing quarter. Irrespective of the outcome, there is some definite good news for investors keen on the Medical sector.
Per the report, Medical is one of the 9 broader sectors among the 16 Zacks sectors which are expected to report earnings growth in Q3. The sector is expected to deliver 3.7% earnings growth on the back of 7.4% higher revenues in the third quarter.
What’s in Store for the Med-Product Space?
Medical product, an important part of the medical device subcategory within the broader Medical sector, holds a lot of promise at the moment. According to a survey by KPMG, the companies under this category that expect to spend more than 6% of revenue on R&D/innovation is rising, and fast exceeding the number of companies spending on R&Ds in other manufacturing industries. These innovations and breakthroughs can be of various forms – new products or surgical techniques, or cost-effective products targeting the emerging markets.
Let’s take a look at the major Medical product stocks slated to release their quarterly reports on Oct 25:
Baxter International Inc. (BAX - Free Report) : This leading medical product company is scheduled to report its third-quarter 2016 earnings on Oct 25. We believe that Baxter’s expanding product pipeline is a key growth catalyst. Newly launched products like SIGMA SPECTRUM infusion pump and AMIA APD cycler with SHARESOURCE two-way connectivity are expected to drive top-line growth in the quarter. We also anticipate continued robust performance by IV solutions in the quarter.
Baxter currently has an Earnings ESP of +2.27%. That is because the Most Accurate estimate stands at 45 cents while the Zacks Consensus Estimate is pegged lower at 44 cents. The company has a Zacks Rank #3 (Hold). While a favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise, a bullish Zacks rank increases the predictive power of the ESP.(Read More: Baxter International Q3 Earnings: Beat in the Cards?)
ResMed Inc. (RMD - Free Report) : This renowned worldwide provider of generators, masks, and related accessories for the treatment of sleep-disordered breathing (SDB) continues to expect solid growth in mask and other accessories categories in the quarters ahead based on its acquisition of Brightree – a health-information technology group, which should get reflected in results from fiscal 2017 beginning.
ResMed is scheduled to report its first-quarter fiscal 2017 earnings on Oct 25, after the closing bell. However, our proven model does not conclusively show that the company is likely to beat earnings this quarter. ResMed has an Earnings ESP of -4.67%. That is because the Most Accurate estimate is 60 cents while the Zacks Consensus Estimate is pegged higher at 63 cents. The company carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.(Read More: What's in the Cards for ResMed in Q1 Earnings?)
Cepheid : Orthopedic reconstructive products manufacturer is slated to report its third-quarter 2016 financial numbers on Oct 25. We believe Danaher’s announcement to take over Cepheid for $4 billion is a strategic fit for the latter as it will lend the company wider exposure along with access to Danaher’s patient base. Additionally, Cepheid will be able to deal with margin and financial issues related to the escalating expenses associated with pipeline development.Also, the successful execution of the company’s strategy to grow its testing business is a major positive.
Cepheid currently has a Zacks Rank #3 and an Earnings ESP of -8.33%. That is because the Most Accurate estimate stands at a loss of 13 cents while the Zacks Consensus Estimate stands higher at a loss of 12 cents. Hence, we cannot conclusively predict that Cepheid will beat earnings this quarter. (Read More: What's in Store for Cepheid this Earnings Season?)
Edwards Lifesciences Corp. (EW - Free Report) : This prominent life science company posted a promising global sales performance in the last reported second quarter of 2016, primarily buoyed by strong Transcatheter Heart Valve sales. Post the second quarter, the company announced FDA approval for the expanded use of its SAPIEN 3 transcatheter heart valve for the treatment of patients with severe, symptomatic aortic stenosis who are at intermediate risk for open heart surgery. Further, the product received CE mark in Europe. We expect this major product launch to boost sales in the to-be-reported quarter.
Edwards Lifesciences is expected to release its third-quarter fiscal 2016 financial numbers on Oct 25. The company has a Zacks Rank #2 (Buy) and an Earnings ESP of +2.94%. That is because the Most Accurate estimate is 70 cents, while the Zacks Consensus Estimate is pegged at 68 cents. (Read More: Edward Lifesciences: A Beat in Store in Q3 Earnings?)
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