The medical products sector has been gaining prominence on the back of encouraging demographics, changing market dynamics toward Artificial Intelligence (AI), big-data applications and increased business investments.
However, the space witnesses hindrance from short-term hurdles associated with the U.S.-China trade war.
Despite such short-term geopolitical uncertainties, the long-term prospects of the Medical Products industry are bright at the moment.
In the past decade, the industry witnessed major improvements in precision surgeries, gene therapies, hybrid closed-loop insulin delivery systems, continuous glucose-monitoring platforms, centralized monitoring of hospital patients and electronic health records (EHR). Additionally, a bipartisan two-year suspension of a 2.3% excise tax on Medical Product and Medical Device manufacturers at the beginning of 2018 encouraged massive investments in the sector.
Overall, the third-quarter earnings season, which commenced last week, has so far picked up its pace within the medical product space.
Let’s take a look at some of major Medical Products stocks, scheduled to release third-quarter results on Oct 24.
Per the quantitative Zacks model, stocks with the beneficial combination of a favorable 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.
Boston Scientific Corporation (BSX - Free Report) : Alike the prior reported quarter, we are upbeat about strong contributions this earnings season from Boston Scientific’s Cardiovascular business group, which comprises Interventional Cardiology (IC) and Peripheral Interventions (PI). Last reported quarter, the company generated around 39% of total revenues from this highest revenue generating segment.
Within Structural Heart, we are looking forward to Boston Scientific’s WATCHMAN, ACURATE and IRIS product lines that are expected to aid the top line in the to-be-reported quarter. The company projects revenues from WATCHMAN and ACURATE TAVR franchise to be approximately $450 million in 2018. (read more: Will Boston Scientific's Q3 Earnings Reflect Overall Gain?)
Overall, the Zacks Consensus Estimate of $2.41 billion for total revenues indicates an increase of 8.3% from the year-ago quarter. Also, the earnings estimates of 34 cents reflect a 9.7% rise on a year-over-year basis.
Boston Scientific has a Zacks Rank #3, which increases the predictive power of ESP. It also has an Earnings ESP of +1.72. Thus, this ideal combination suggests an earnings beat for the company this to-be-reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Align Technology, Inc. (ALGN - Free Report) : Align Technology is expected to gain from a continued adoption of Invisalign Technology during the third quarter of 2018. The company predicts Invisalign case shipments in the band of 302,000-307,000, up 28-30% from the year-ago figure.
This apart, Align Technology has been reaping strong revenues from the Scanner and Service business over the past few quarters. Moreover, the company has been seeing an increased adoption of iTero scanners for Invisalign case submissions instead of PVS impressions, especially in North America. Management estimates this trend to reflect in the company’s impending third-quarter results. (read more: Can Overall Growth Drive Align Technology Q3 Earnings?)
The Zacks Consensus Estimate for earnings of $1.19 represents a 17.8% rise year over year.
Align Technology has a Zacks Rank of 3 and an Earnings ESP of +0.21%, a combination that predicts probability of an earnings beat for Align Technology.
Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp: LabCorp is likely to repeat its success trend in the third quarter of 2018, which has sustained over the past few quarters. The company is likely to gain 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 optimistic about the company’s collaboration with European provider of clinical laboratory testing Unilabs. This alliance started broadening the network of laboratories used by biopharmaceutical companies to support companion diagnostic development and commercialization. (read more: LabCorp to Report Q3 Earnings: What's in Store?)
The Zacks Consensus Estimate for earnings of $2.87 per share depicts 16.67% growth year over year. Revenue expectation is pegged at $2.84 billion, a 7% improvement year over year.
LabCorp has a Zacks Rank #4 (Sell), which lowers the predictive power of ESP. Its Earnings ESP of -0.56% also makes surprise prediction difficult.
Thermo Fisher Scientific Inc. (TMO - Free Report) : Thermo Fisher has been going strong with its analytical instrument business, boasting higher global demand. The company is witnessing balanced growth across all its businesses within this segment, especially in chemical analysis, chromatography mass spectrometry and electron microscopy. Its acquisition of FEI has been largely boosting its analytical instruments portfolio over the past year. Ever since, the company has introduced several products, which leverage its leading instrument platforms and digital capabilities.
Further, we are encouraged by the favorable NIH (National Institutes of Health) funding scenario. Per Thermo Fisher, NIH funds have been flowing well ever since the institute’s promising announcement in May 2018 to allocate $130 million to research based on cryo-electron microscopy, which bodes well for huge future demand. This also translates into a vital highlight of the company’s analytical instrument performance.
However, we are anxious about Thermo Fisher facing a foreign exchange headwind pertaining to 2018 revenues and its adjusted EPS. Also, a hostile macroeconomic condition continues to weigh heavily on the stock. Plus, stiff competition persistently poses challenges to the stock’s value. (read more: Can Overall Growth Drive Thermo Fisher Q3 Earnings?)
Thermo Fisher is a Zacks #3 Ranked player. It also has an Earnings ESP of +0.48%. This combination implies a possible estimate beat for the company this reporting cycle.
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