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3 Medical Product Stocks to Trump Estimates in Q3 Earnings
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America’s unparalleled purchasing power along with massive demand for medical products, medical instruments, medical services and lab equipment has provided the nation a leading position in the global medical product space.
The 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.
Considering the positive backdrop, it will be interesting to analyze how the sector has geared up for third-quarter earnings, which is underway.
Favorable Factors at Play
A bipartisan two-year suspension of the ‘Medical Device’ tax earlier in 2018, which imposed a 2.3% excise tax on MedTech manufacturers, has been a temporary relief. The repeal is expected to boost hiring and investment among the 9,000 U.S.-based medical-product manufacturers.
This along with a favorable consumer behavior in higher demand for liquid biopsy tests, use of IT for quick and improved patient care as well as the shift of the payment system to a value-based model have been driving profits of medical product companies.
The Weak Spots
In spite of a solid start to the quarter, factors like a strong dollar, trade disputes and economic weakness abroad are some of the concerns.
Emerging Markets Under Stress: In the wake of strict monetary policy by the Fed, financial conditions for major emerging economies like Brazil, India, Indonesia, Turkey and elsewhere have started to weaken. Not to forget, the U.S. medical product manufacturers have always leveraged on these economies for their easy regulations, low-priced technology, favorable labor laws and cheap raw materials.
Thus, tighter financial conditions are expected to affect economic growth in these markets, which will hurt the profitability of the medical product companies in particular.
The Trade War Saga: Apart from this, the U.S.-China trade war has triggered a short-term downtrend in the medical product sector.
In September, the Trump administration announced a new round of tariffs (almost 10%) on Chinese imports worth about $200 billion. A significant portion of these imports includes medical product, devices and imaging components.
Although it is not likely to reflect on third-quarter results, a few analysts believe these might have some effect on the upcoming results of medical product companies.
Expectations From Medical Product Sector in Q3
Despite the headwinds, the Medical Product sector (comprising some of the biggest MedTech companies in the world) has inched up 1.7% compared with the S&P 500’s rise of 0.4% on the bourse in the past six months.
In fact, our Earnings Trend report reveals that the broader Medical sector, which includes medical product, is likely to put up a strong show this earnings season. The sector has already witnessed releases from companies that account for 35.7% of the sector’s total market capitalization in the S&P 500 index as of Oct 24. Total earnings for these medical companies are up 15.9% from prior-year quarter’s figures on 13.1% higher revenues. Further, the beat ratio is expected to be impressive, with 71.4% companies surpassing bottom-line expectations and 57.1% outperforming on the top-line front.
As a whole, the projected earnings growth rate of medical sector is expected to be 9.4% on 6.7% revenue improvement (as of Oct 24).
So, it will be interesting to see how the medical product companies are placed ahead of the reporting cycle.
How to Pick Potential Q3 Winners?
The Zacks methodology helps to identify medical product stocks that not only boast solid fundamentals but are also poised to beat earnings estimates this earnings season.
Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have a higher chance of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
OraSure Technologies, Inc (OSUR - Free Report) , which is scheduled to report third-quarter 2018 results on Nov 7, is a solid bet. The company has a trailing four-quarter average positive earnings surprise of 33.5%.
For the quarter to be reported, the Zacks Consensus Estimate for earnings is currently pegged at 11 cents per share, indicating a rise of 22.2% year over year. The Zacks Consensus Estimate for revenues is pegged at $44.7 million, showing an increase of 5.6% year over year.
OraSure’s Earnings ESP of +4.76% and a Zacks Rank #1 make us reasonably confident of a positive surprise.
Another stock worth considering is Haemonetics Corporation (HAE), which is scheduled to report third-quarter 2018 results on Nov 6. The company has a trailing four-quarter average positive earnings surprise of 24.6%.
For the quarter to be reported, the Zacks Consensus Estimate for earnings is currently pegged at 54 cents per share, reflecting an improvement of 12.5% year over year. The Zacks Consensus Estimate for revenues is pegged at $233.5 million, reflecting a rise of 3.6% year over year.
Haemonetics has an Earnings ESP of +5.56% and a Zacks Rank #1, a combination that indicates positive earnings surprise this reporting cycle.
Another viable option is Quidel Corporation (QDEL). The company is likely to release third-quarter 2018 results on Nov 6.
For the quarter to be reported, the Zacks Consensus Estimate for earnings is currently pegged at 50 cents per share, showing a surge of 412.5% year over year. The Zacks Consensus Estimate for revenues is pegged at $120.7 million, reflecting an improvement of 137.1% year over year.
Quidel has an Earnings ESP of +10.55% and Zacks Rank #3, a combination that indicates an earnings beat in this reporting cycle.
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
3 Medical Product Stocks to Trump Estimates in Q3 Earnings
America’s unparalleled purchasing power along with massive demand for medical products, medical instruments, medical services and lab equipment has provided the nation a leading position in the global medical product space.
The 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.
Considering the positive backdrop, it will be interesting to analyze how the sector has geared up for third-quarter earnings, which is underway.
Favorable Factors at Play
A bipartisan two-year suspension of the ‘Medical Device’ tax earlier in 2018, which imposed a 2.3% excise tax on MedTech manufacturers, has been a temporary relief. The repeal is expected to boost hiring and investment among the 9,000 U.S.-based medical-product manufacturers.
This along with a favorable consumer behavior in higher demand for liquid biopsy tests, use of IT for quick and improved patient care as well as the shift of the payment system to a value-based model have been driving profits of medical product companies.
The Weak Spots
In spite of a solid start to the quarter, factors like a strong dollar, trade disputes and economic weakness abroad are some of the concerns.
Emerging Markets Under Stress: In the wake of strict monetary policy by the Fed, financial conditions for major emerging economies like Brazil, India, Indonesia, Turkey and elsewhere have started to weaken. Not to forget, the U.S. medical product manufacturers have always leveraged on these economies for their easy regulations, low-priced technology, favorable labor laws and cheap raw materials.
Thus, tighter financial conditions are expected to affect economic growth in these markets, which will hurt the profitability of the medical product companies in particular.
The Trade War Saga: Apart from this, the U.S.-China trade war has triggered a short-term downtrend in the medical product sector.
In September, the Trump administration announced a new round of tariffs (almost 10%) on Chinese imports worth about $200 billion. A significant portion of these imports includes medical product, devices and imaging components.
Although it is not likely to reflect on third-quarter results, a few analysts believe these might have some effect on the upcoming results of medical product companies.
Expectations From Medical Product Sector in Q3
Despite the headwinds, the Medical Product sector (comprising some of the biggest MedTech companies in the world) has inched up 1.7% compared with the S&P 500’s rise of 0.4% on the bourse in the past six months.
In fact, our Earnings Trend report reveals that the broader Medical sector, which includes medical product, is likely to put up a strong show this earnings season. The sector has already witnessed releases from companies that account for 35.7% of the sector’s total market capitalization in the S&P 500 index as of Oct 24. Total earnings for these medical companies are up 15.9% from prior-year quarter’s figures on 13.1% higher revenues. Further, the beat ratio is expected to be impressive, with 71.4% companies surpassing bottom-line expectations and 57.1% outperforming on the top-line front.
As a whole, the projected earnings growth rate of medical sector is expected to be 9.4% on 6.7% revenue improvement (as of Oct 24).
So, it will be interesting to see how the medical product companies are placed ahead of the reporting cycle.
How to Pick Potential Q3 Winners?
The Zacks methodology helps to identify medical product stocks that not only boast solid fundamentals but are also poised to beat earnings estimates this earnings season.
Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have a higher chance of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here. That said, investors can count on these stocks which are most likely to top estimates.
Our Choices
OraSure Technologies, Inc (OSUR - Free Report) , which is scheduled to report third-quarter 2018 results on Nov 7, is a solid bet. The company has a trailing four-quarter average positive earnings surprise of 33.5%.
For the quarter to be reported, the Zacks Consensus Estimate for earnings is currently pegged at 11 cents per share, indicating a rise of 22.2% year over year. The Zacks Consensus Estimate for revenues is pegged at $44.7 million, showing an increase of 5.6% year over year.
OraSure’s Earnings ESP of +4.76% and a Zacks Rank #1 make us reasonably confident of a positive surprise.
OraSure Technologies, Inc. Price and Consensus
OraSure Technologies, Inc. Price and Consensus | OraSure Technologies, Inc. Quote
Another stock worth considering is Haemonetics Corporation (HAE), which is scheduled to report third-quarter 2018 results on Nov 6. The company has a trailing four-quarter average positive earnings surprise of 24.6%.
For the quarter to be reported, the Zacks Consensus Estimate for earnings is currently pegged at 54 cents per share, reflecting an improvement of 12.5% year over year. The Zacks Consensus Estimate for revenues is pegged at $233.5 million, reflecting a rise of 3.6% year over year.
Haemonetics has an Earnings ESP of +5.56% and a Zacks Rank #1, a combination that indicates positive earnings surprise this reporting cycle.
Haemonetics Corporation Price and Consensus
Haemonetics Corporation Price and Consensus | Haemonetics Corporation Quote
Another viable option is Quidel Corporation (QDEL). The company is likely to release third-quarter 2018 results on Nov 6.
For the quarter to be reported, the Zacks Consensus Estimate for earnings is currently pegged at 50 cents per share, showing a surge of 412.5% year over year. The Zacks Consensus Estimate for revenues is pegged at $120.7 million, reflecting an improvement of 137.1% year over year.
Quidel has an Earnings ESP of +10.55% and Zacks Rank #3, a combination that indicates an earnings beat in this reporting cycle.
Quidel Corporation Price and Consensus
Quidel Corporation Price and Consensus | Quidel Corporation Quote
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>