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Medical Product Earnings Lineup for Jul 25: TMO, BSX & More

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The second-quarter earnings season has commenced with 87 S&P 500 participants (25.7% of the total market cap) already releasing their financial results till Jul 20.

Per the latest Earnings Preview, results have been encouraging for most sectors as total earnings for the members rose 20.9% on 10.3% higher revenues. With 175 S&P 500 members lined up for reporting their quarterly figures this week, we are decidedly bullish on the market, which has so far demonstrated a strong revenue momentum.

Medical, one of the broader sectors among the 16 Zacks sectors, is expected to put up an impressive show in the to-be-reported quarter. For the second quarter, the projected earnings growth rate for the sector is 9.1% on 6.4% revenue growth. In comparison, the reported bottom-line growth rate during the first quarter of 2018 was quite commendable at 13.8% on 7.2% revenue rise.

Medical Products — A Mixed Bag Amid Geo-Political Uncertainties

The Medical Product space within the broader Medical gamut currently offers unprecedented opportunities for growth and market share expansion. Solid investment in (research and development) R&D has helped manufacturers use the benefits from big data, artificial intelligence (AI) and medical mechatronics.

Additionally, the Medical product market has further gathered steam owing to the recent two-year suspension of the controversial 2.3% Medical Device tax. This excise tax was implemented in 2013 as part of Obamacare on MedTech manufacturers, significantly restricting R&D activities.

The industry is also catching up with the digital-data age. Enormous size of information can be captured through technology for arriving at business insights. This helps the healthcare sector provide better care and reduce wastage of time and effort. This latest trend of adopting electronic health record (EHR) services in the U.S. MedTech space has also been gaining popularity.

Meanwhile, investors are concerned about the ongoing trade dispute, which can severely hurt the medical device companies’ international trade practice.

Accusing China of unfair trade exercises, President Donald Trump has recently slapped punitive duties on $34 billion of Chinese goods. This was followed by an immediate retaliation from China, which imposed tariffs on U.S. exports of $3 billion. It came after Trump’s proposal of implementing tariffs on more than $500 billion worth of Chinese goods. Notably, MedTech firms in the United States currently sell $4.7 billion worth of medical devices annually to China and import a total of $5 billion of the same (Per an article in Mondaq).

Against this backdrop, let’s take a look at a few major Medical Product stocks scheduled to release earnings numbers on Jul 25:

Per the quantitative Zacks model, stocks with the ideal combination of a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have higher chances of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Thermo Fisher Scientific Inc. (TMO - Free Report) is gearing up for robust second-quarter results, primarily driven by analytical instruments segmental growth. In the second quarter, the company expects to see a positive impact from the electron microscopy business as well as a strong volume leverage and productivity.

The Zacks Consensus Estimate for Analytical Instruments revenues is pegged at $1.258 billion, higher than the year-ago figure of $1.166 billion. (read more: Thermo Fisher (TMO - Free Report) to Report Q2 Earnings: What's in Store? ).

Notably, the company’s earnings outpaced the Zacks Consensus Estimate by an average of 3.16% in the trailing four quarters. The consensus mark for second-quarter earnings is pegged at $2.63 per share (14.35% increase from the year-ago period) on revenue estimates of $5.92 billion (an 18.6% improvement from the year-ago tally).

However, despite the bright prospects, our proven model does not conclusively show a beat for the company. Thermo Fisher has an Earnings ESP of -0.04%, which decreases the odds of an earnings surprise, and a Zacks Rank #4 (Sell), which lowers the predictive power of ESP.

Boston Scientific Corporation (BSX - Free Report) : For the second quarter, we are optimistic about the company’s Interventional Cardiology (IC) business that will likely help the company maintain impressive global growth, courtesy of an innovative portfolio and sturdy commercial teams. This apart, within Structural Heart, we are looking forward to Boston Scientific’s WATCHMAN, ACURATE and IRIS product lines, expected to contribute to its top line in the yet-to-be-reported quarter.

(read more: Boston Scientific (BSX - Free Report) Q2 Earnings: Is a Beat in Store? ).

The Zacks Consensus Estimate for earnings is pegged at 34 cents per share, indicating a 6.25% year-over-year improvement. The stock surpassed the Zacks Consensus Estimate in all the trailing four quarters with an average beat of 0.39%.

However, the quantitative Zacks model does not conclusively predict an estimate beat for the company, given the combination of a Zacks Rank of 4 and an Earnings ESP of +0.10%.

Varian Medical Systems, Inc. : In the soon-to-be-reported third quarter of fiscal 2018, a favorable revenue opportunity from the company’s portfolio of Oncology and Imaging Component products, the growing adoption of Proton Therapy and a firm overseas presence are likely to drive Varian’s earnings.

Last reported quarter, the company’s earnings came in at $1.15 per share, beating the Zacks Consensus Estimate by 8.5%. On average, Varian Medical delivered a positive earnings surprise of 4.43% over the last four quarters.

The company currently has a Zacks Rank #3, which increases the predictive power of ESP but an Earnings ESP of -2.49%, leaving the surprise prediction inconclusive. (Read More: Varian Medical Q3 Earnings: Surprise in Store?)

Laboratory Corp. of America Holdings (LH - Free Report) is likely to repeat its success trend from the first quarter of 2018. The company is expected to benefit from a strong LabCorp Diagnostics segment in the period to be reported, banking on a favorable price, mix, tuck-in acquisitions and organic volume. Particularly, we are hopeful about the company’s collaboration with European provider of clinical laboratory testing Unilabs.

Notably, the company’s earnings outshined the Zacks Consensus Estimate by an average of 3.85% in the preceding four quarters.The consensus estimate for second-quarter earnings of $2.92 per share implies a substantial improvement of 18.2% from the prior-year tally. The estimate revision for the company’s revenues stands at $2.85 billion, representing a 12.1% rise year over year.

Laboratory Corp. currently has a Zacks Rank of 3 and an Earnings ESP of +0.44%. Hence, we are upbeat that the company’s earnings will surpass estimates this reporting cycle. (Read More: Can Strategic Alliances Aid LabCorp's (LH - Free Report) Q2 Earnings?)

Align Technology, Inc. (ALGN - Free Report) : The company has expanded its Invisalign clear aligner range with the latest launch of Vivera Retainers coupled with Precision Bite Ramps. With deep bite malocclusion gradually becoming a very common orthodontic occurrence worldwide, we consider this development a major breakthrough for Align Technology with respect to customer adoption.

Last reported quarter, the company’s bottom line totaled $1.17 per share, ahead of the Zacks Consensus Estimate by 19.4%. On average, Align pulled off a positive surprise of 20.7% over the last four quarters.

The company currently sports a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +2.05%. You can see the complete list of today’s Zacks #1 Rank stocks here.

(Read More: Can Overall Growth Drive Align Technology (ALGN - Free Report) Q2 Earnings?)

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