The political gridlock over the Affordable Care Act or Obamacare has been making headlines in the MedTech space. Amid such political conundrum at the Capitol Hill, market watchers will be keeping a tab on the MedTech space.
Of the recent developments, the GOP failure at Senate to repeal Obamacare is likely to cause tremors in the political circles once the August recess has ended. This is evident with Vice President Pence throwing his hat in the ring, vowing to end the “ObamaCare nightmare” at the Tennessee GOP 2017 Statesmen's Dinner on Thursday. Plans are also afoot from GOP senators Lindsey Graham and Bill Cassidy to redirect money, currently spent on providing coverage through ObamaCare. Per the plans, the amount will be distributed among states to spend accordingly.
Amid such political conundrum at the Capitol Hill, market watchers will keep a tab on the Medical space. The fraternity worries whether the final ‘Trump-care plan’ will still include the MedTech tax repeal in its agenda. Meanwhile, the old template of the plan, which promised to eradicate the infamous 2.3% medical device tax and the Cadillac tax (40% excise tax on high-cost healthcare plans) was not a bad deal. Amid such uproar, the question that emerges is how medical product players stand to gain or lose.
Notably, 84% of the total S&P 500 companies in the broader Medical sector have released their second-quarter results, as of Aug 4. With a beat ratio of 87.0%, total earnings for these companies improved 7.1% year over year. Revenues for these companies also came up with a beat ratio of 69.6%. In fact, this encouraging trend is likely to continue as the latest Earnings Preview suggests that stocks in the much sought-after S&P 500 Index will witness 10% bottom-line expansion this reporting cycle.
Further, there are some powerful long-term tailwinds in the medical space, including mergers & acquisitions (M&A), emerging market expansion, positive demographic trends and new product innovation. These have been a major driving force behind the sector’s impressive performance over the past few quarters even amid severe socio-economic and political instabilities. Rising interest rates and the strengthening of U.S. dollar continue to act as dampeners for this industry.
How to Make the Right Pick?
With the existence of a number of industry players, finding the right stocks that have the potential to beat earnings could be a daunting task. Our proprietary methodology makes it fairly simple for you. You could narrow down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.
Earnings ESP is our proprietary methodology to determine which stocks have the best chance to surprise in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that 70% of stocks with this combination have the chance of a positive earnings surprise. An earnings beat boosts investor’s confidence in the stock, which is reflected in its rapid price appreciation. You can uncover the best stocks to buy or sell before they report with our Earnings ESP Filter.
Given below are four Medical Product players that have the right combination of elements to post an earnings beat this quarter:
Agios Pharmaceuticals, Inc. (AGIO - Free Report) – Cambridge, MA-based Agios Pharmaceuticals, Inc. is a development-stage biopharmaceutical company focused on the development of treatments for cancer and rare genetic metabolic disorders, which is a subset of orphan genetic metabolic diseases.
We note that Agios Pharmaceuticals has beaten the Zacks Consensus Estimate in two out of the trailing four quarters, with an average positive earnings surprise of 0.90%.
This Zacks Rank #3 stock has an Earnings ESP of +1.99%. The company is anticipated to report second-quarter 2017 results on Aug 8. You can see the complete list of today’s Zacks #1 Rank stocks here.
DENTSPLY Sirona Inc. (XRAY - Free Report) – Headquartered in York, PA, DENTSPLY SIRONA Inc. is a global leader in the design, development, manufacture and marketing of dental consumables, dental laboratory products, dental specialty products and consumable medical device products.
The company has beaten the Zacks Consensus Estimate in three of the preceding four quarters, with an average positive earnings surprise of 3.12%.
The company is set to report second-quarter 2017 results on Aug 9. Currently, DENTSPLY Sirona has an Earnings ESP of +4.55% and carries a Zacks Rank #3.
Dextera Surgical Inc. – Redwood City, CA-based, Dextera Surgical Inc., designs and manufactures proprietary stapling devices for surgical procedures. The company's product consists of MicroCutter 5/80, used for transection and resection in urologic, thoracic and pediatric surgical procedures. The product is also applicable for transection, resection and creation of anastomoses in the intestine and the transection of the appendix.
The company has missed the Zacks Consensus Estimate in the preceding three quarters, with an average negative earnings surprise of 4.64%.
This Zacks Rank #2 stock has an Earnings ESP of +9.09%. The company is expected to report second-quarter 2017 results on Aug 8.
Nuvectra Corporation – Nuvectra Corporation develops and commercializes neuromodulation medical device for the treatment of nervous system disorders. It provides neural interface technology, components and systems, as well as NeuroNexus SmartBox portable control and data streaming systems. Nuvectra Corporation is based in Plano, TX.
We note that the company has missed the Zacks Consensus Estimate in the preceding three quarters, with an average negative earnings surprise of 3.08%.
The company is set to report second-quarter 2017 results on Aug 8. Currently, the company has an Earnings ESP of +4.20% and carries a Zacks Rank #3.
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