Back to top

Medical Product Stock Earnings on Aug 6: CAH, HSIC & More

Read MoreHide Full Article

The second quarter earnings season has seen releases from 381 members in the S&P 500 cohort as of Aug 2. Per the latest Earnings Preview, performances of these index participants indicate a 25% increase in total earnings on 10.4% higher revenues. The beat ratio is also impressive with 80.1% companies surpassing bottom-line expectations and 73.8% outperforming on the top-line front.

By the end of this ongoing reporting cycle, earnings for the S&P 500 companies are expected to grow 23.9% on the whole, from the year-ago quarter’s tally on 9.3% rise in revenues.

Earnings Expectations From Medical Sector

Medical — one of the broader sectors among the 16 Zacks sectors — is expected to record earnings growth this time around. For the quarter under review, the projected earnings growth rate for the sector is 15.1% on 7.2% revenue growth.

Meanwhile, a few MedTech majors have already reported some solid financial results. Of the notable ones, Boston Scientific (BSX - Free Report) delivered adjusted earnings of 41 cents per share, outpacing the Zacks Consensus Estimate of 34 cents.

Stryker Corporation (SYK - Free Report) reported adjusted earnings per share of $1.76, beating the Zacks Consensus Estimate by 1.7%. The bottom line also improved 15% year over year and exceeded the high end of the company’s guidance.

What’s in Store for Medical Products Space?

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 of 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 fast catching up with the digital-data age. An 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. The 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 on-going trade dispute, which might severely pose a threat to the medical device companies’ international trade practice.

Accusing China of unfair trade exercises, President Donald Trump recently levied punitive duties on $34 billion of Chinese goods. This move was followed by an immediate retaliation from China, which imposed tariffs on U.S. exports of $3 billion. It came after Trump’s proposal to implement tariffs on more than $500 billion worth of Chinese goods. Notably, MedTech firms in the United States currently sell medical devices of worth $4.7 billion 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 leading Medical Product stocks scheduled to release earnings numbers on Aug 6:

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

Cardinal Health Inc. (CAH - Free Report) is gearing up for robust fourth-quarter fiscal 2018 results, primarily driven by Pharmaceutical segmental growth. The segment is likely to register strong growth in the Specialty business as well as gain a large number of Pharmaceutical Distribution customers. In fact, the Zacks Consensus Estimate for segmental revenues is pegged at $30.69 billion, showing a 3.8% gain year over year.

However, of late, the segment witnessed expiration of a large, mail-order customer contract along with the divestiture of the company's China distribution business. This is likely to leave an adverse impact on fourth-quarter profits from the segment. (read more: What's in Store for Cardinal Health (CAH - Free Report) in Q4 Earnings?).

For the quarter to be reported, the Zacks Consensus Estimate for earnings is pegged at 93 cents per share, reflecting a decline of 29% year over year. The same for revenues stands at $34.55 billion, indicating a 4.8% climb.

Cardinal Health currently has a Zacks Rank of 3 and an Earnings ESP of +1.40%. Hence, we are upbeat that the company’s earnings will surpass estimates this reporting cycle.

Henry Schein, Inc. (HSIC - Free Report) : Over the last few quarters, Henry Schein demonstrated strong growth across all four segments, namely Dental, Animal Health, Medical and Technology plus Value-Added Services. Geographically, the company gained traction in North America and overseas. We expect this trend to continue in the impending second-quarter results as well.

(read more: Can Dental Growth Drive Henry Schein's (HSIC - Free Report) Q2 Earnings? ).

The Zacks Consensus Estimate of $1.02 for second-quarter 2018 adjusted earnings reflects an improvement of 15.9% year over year. The consensus mark for same period’s total revenues of $3.30 billion represents a 7.9% increase from the year-ago period’s figure.

Henry Schein, Inc. Price and EPS Surprise

Henry Schein, Inc. Price and EPS Surprise | Henry Schein, Inc. Quote

However, the proven Zacks methodology does not conclusively predict an estimate beat for the company, given the combination of a Zacks Rank of 3 and an Earnings ESP of -0.25%.

Luminex Corporation (LMNX - Free Report) : Luminex Corp, founded in 1995 and based in Austin, TX, develops, manufactures and markets proprietary biological testing technologies with applications via the life sciences and diagnostics industry. In the soon-to-be-reported second quarter of 2018, the company is expected to be rewarded with a broad product portfolio comprising its advanced xMAP, xTAG and Multi Code technology.

Last reported quarter, the company’s earnings came in at 25 cents per share, exceeding the Zacks Consensus Estimate of 22 cents. Further, earnings rose 13.6% on a year-over-year basis.On average, Luminex delivered a positive earnings surprise of 125.98% over the trailing four quarters.

The company currently has a Zacks Rank #3, which increases the predictive power of ESP. However, an Earnings ESP of 0.00% makes surprise prediction difficult.

NxStag Medical, Inc. (NXTM - Free Report) is a medical technology company, which develops, manufactures and markets products and services for patients suffering a chronic or an acute kidney failure. Its primary product is the System One, a portable hemodialysis system, used primarily for home hemodialysis and a range of dialysis therapies delivered in the home setting.

The stock is currently  a Zacks #3 Ranked player and has an Earnings ESP of 0.00%, thus making surprise prediction difficult.You can see the complete list of today’s Zacks #1 Rank stocks here.

Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>
 



More from Zacks Analyst Blog

You May Like