With the second-quarter earnings season gaining momentum, the broader picture no longer looks as bright as it was expected to be. Putting together all the 128 S&P 500 members’ released results as of Jul 25, constituting 36% of the index’s total membership, we note that earnings growth pace is less than the last quarter. However, it is more or less in line with the trailing four-quarter average earnings growth and exceeds the trailing 12-quarter average.
Per the latest second-quarter scorecard, total earnings increased 7% year over year on 4.2% higher revenues. While earnings beat ratio remains at 77.3%, revenue beat ratio is at 70.3%. (For more information, please consult our Zacks Earnings Analysis).
What’s in Store for the Medical Space?
Investors are concerned about the healthcare space, a sector that has been seen through a lot of struggle during the past half year, thanks to the political power change and the ongoing policy restructuring related battle.
While yesterday, it was finally President Donald Trump’s win with the Republican healthcare bill passing one more barrier by a very narrow margin, investors are however not much optimistic about this development. Per a Vox article today, in its effort to repeal and replace Obamacare, “President Donald Trump continues to make bold promises about what that bill would do — promises that all available analysis suggests the bill will not keep”.
While there are still chances that the Senate will amend the latest bill, its extent still remains unclear. Accordingly, uncertainty within the medical space is towering high. Investors are currently adopting a wait-and-see policy about this space.
Let’s sneak a peek into the performance of five major Medical – Products companies within the broader Medical space expected on Jul 27.
Align Technology, Inc. (ALGN - Free Report) : We are upbeat about Align Technology’s execution of strategic initiatives like international expansion, which ensured Invisalign treatment for a growing base of patients. In this context, the company strengthened its foothold internationally by acquiring the Invisalign distributors in the highly lucrative Europe, Middle East and Africa (EMEA) region as well as Brazil in February. This is likely to drive the company’s results in the soon-to-be-reported quarter.
Align is expected to beat expectations when it reports second-quarter 2017 results before the market opens, as it has the right combination of two key ingredients. The stock currently carries a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +2.74%. We note that, while a positive Zacks ESP serves as a leading indicator of a likely positive earnings surprise, a bullish Zacks Rank increases the predictive power of the ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
(Read More: Align Technology Q2 Earnings: A Beat in the Cards?)
Boston Scientific Corporation (BSX - Free Report) : We believe, this medical device major’s second-quarter performance will be grossly impacted by the company’s product recall issue within Europe. On the other hand, the company’s downbeat interventional cardiology business may get some sort of a boost with the company’s $435 million acquisition of Switzerland-based Symetis SA.
Boston Scientific is scheduled to report second-quarter 2017 results after the market closes. The company currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.00%. Hence, we are unable to conclude whether Boston Scientific is likely to beat on earnings this quarter. Note that all Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.
(Read More: Boston Scientific Q2 Earnings: What Awaits the Stock?)
Cerner Corporation (CERN - Free Report) : We believe, Cerner’s strong sales performance as well as its solid portfolio and strategic initiatives have positioned it well for stellar growth. Cerner announced that it has been chosen by the U.S. Department of Veterans Affairs to develop an electronic health record (EHR) system. Department of Veterans Affairs will use the same system the company is developing for the U.S. Department of Defense, which began its operation at its first site in February. This system will facilitate the exchange of data between military care facilities and civilian health providers, where current and former service members receive care.
This leading healthcare information technology (HCIT) company is scheduled to report second-quarter 2017 earnings after the market closes. The company currently carries a Zacks Rank #2 and an Earnings ESP of +1.75%. Hence it is expected to beat expectations this quarter. You can see the complete list of today's Zacks #1 Rank stocks here.
(Read More: Can Cerner Deliver a Beat this Earnings Season?)
Stryker Corporation (SYK - Free Report) : For the second quarter of 2017, this renowned medical device maker expects adjusted earnings per share in the range of $1.48–$1.52. Notably, this indicates a rise of 6.5%-9.4% on a year-over-year basis. We believe that the growing adoption of MAKO robots will drive sales in the orthopedic and reconstructive surgery market. Additionally, Stryker is well poised on the acquisitions of both Sage and Physio-Control in the past.
The company also expects to beat expectations when it reports second-quarter 2017 results after the closing bell. This is because the stock currently carries a Zacks Rank #3 (Hold) and an Earnings ESP of +0.66%.
(Read More: Will Stryker Deliver a Beat this Earnings Season?)
McKesson Corporation (MCK - Free Report) : This major player in the pharmaceutical and medical supplies distribution market expects to gain from a gradually stabilizing generic and branded market. The company’s distribution solutions segment performed favorably in fiscal 2017 despite weak pricing trends and customer consolidation.
We are unable to conclude whether McKesson is likely to beat on earnings this quarter. The stock carries a Zacks Rank #3, which increases the predictive power of ESP and an Earnings ESP of 0.00%. We need to have a positive ESP to be confident about an earnings beat.
(Read More: McKesson Q1 Earnings: Stock Likely to Beat Estimates?)
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