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3 Medical Product Stocks Likely to Beat This Earnings Season

Trina Mukherjee

The Medical Products companies, within the broader Medical sector, have put up an impressive show so far this earnings season. Per the latest Earnings Preview, 53.8% of total S&P 500 members within the Medical sector have already reported their financial numbers. Going by the scorecard so far, total earnings for these sector participants are up 3.5% from the year-ago period on 5.8% rise in revenues. Of the companies that reported, 70.7% beat on earnings while 67.3% surpassed on revenues.

Overall, earnings from this sector are expected to increase 3.8% on 5.3% higher revenues. However, the projections indicate a sequential decline from the third quarter. Notably, the third quarter witnessed earnings growth of 6.2% on 7.2% revenue improvement.

Some key Medical Products companies that have released financial numbers include Stryker Corporation SYK and Thermo Fisher Scientific TMO. Stryker reported fourth-quarter 2019 adjusted earnings per share (EPS) of $2.49, which beat the Zacks Consensus Estimate by 1.2%. Revenues of $4.13 billion also surpassed the consensus mark by 0.7%.

Meanwhile, Thermo Fisher’s fourth-quarter EPS of $3.55 beat the Zacks Consensus Estimate by a penny while revenues of $6.83 billion outpaced the same by 0.7%.

Overall, earnings from this sector are expected to improve 3.8% on 5.3% higher revenues. Although these projections indicate a sequential decline, the same hints at earnings growth of 6.2% on 7.2% revenue improvement for the quarter to be reported.

Over the past few months, the medical device space has been witnessing exceptional progress with regards to innovation — R&D to be precise. With AI-powered launches like polyp detector, autonomous AI imaging system for detecting skin cancer, diabetic retinopathy using retinal images, talking algorithm, drugstore chatbots and many more, the medical device space has been going from strength to strength. Boston Scientific’s BSX heart failure predictor HeartLogic and EMBLEM S-ICD drove the company’s fourth-quarter defibrillator sales. Further, Edwards Lifesciences’ Inspiris Resilia for patients with aortic heart valve acted as major growth catalysts in the final quarter of 2019.

Strong demand in the emerging markets has been primarily driving the industry participants in this reporting cycle. For instance, Stryker’s core Orthopaedic segment put up a solid show in the emerging markets in the fourth quarter, driving international revenues by 7.6%. Additionally, Abbott’s ABT Established Pharmaceuticals Division saw robust performance in emerging markets in the quarter.

According to a MedTech Dive report, as stated by Moody’s in 2019,  the medical device makers are likely to exhibit mid-single-digit revenue growth fueled by product innovation across most of the companies and categories throughout 2019.

In the fourth quarter, the government came up with its funding bills where it suspended Medical Device tax of 2.3%. This tax was originally enacted in 2013 as part of the Affordable Care Act (ACA). The burden of this 2.3% tax used to fall on the device manufacturer or importer. The suspension has come as a relief for medical device manufacturers, enabling them to channelize their funds into R&D. This move as of now has positively impacted fourth-quarter performance of the industry players.

However, the U.S.-China trade war triggered a short-term downtrend in the Medical Instruments sector. Despite a series of recent exemptions by the U.S. Trade Representative (USTR) and the introduction of the phase one trade deal, the industry has been apprehensive regarding the impact that the trade war may have had on the fourth quarter. Going by a Forbes report, "medical device makers say there is impact to the industry and the threat of more tariffs to come in an ongoing trade war with China is troubling, hitting various parts of the medtech industry."

Zacks Methodology

Given the high degree of diversity in the Medical Products industry, finding the right stocks with the potential to beat estimates might be quite a daunting task.

However, our proprietary Zacks methodology, makes this routine fairly simple.

Per our proven model, the combination of — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with this combination, chances of a positive earnings surprise are as high as 70%.

Earnings ESP provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Here we present three stocks that are expected to beat earnings estimates in this reporting cycle.

HealthEquity, Inc. HQY: HealthEquity’s fourth-quarter fiscal 2020 top line is anticipated to reflect improvement across its segments – Service Revenues, Custodial Revenues and Interchange Revenues. In fact, the company projects revenues between $520 million and $526 million, significantly higher than the previously projected range of $341-$347 million in fiscal 2020.

The company is likely to have experienced higher Health Savings Account (HSA) member growth, on the back of higher HSA assets. HSA member growth is also likely to have contributed the company’s fiscal fourth-quarter performance.

HealthEquity is scheduled to report fourth-quarter fiscal 2020 results on Feb 18.

The company has an Earnings ESP of +18.56% and a Zacks Rank #3.

HealthEquity, Inc. Price and EPS Surprise

 

HealthEquity, Inc. Price and EPS Surprise

HealthEquity, Inc. price-eps-surprise | HealthEquity, Inc. Quote

Tandem Diabetes Care, Inc. TNDM: Tandem Diabetes' strong earnings growth trajectory is expected to have continued in the fourth quarter, courtesy of a strong global surge in sales of its t:slim X2  insulin pump. Solid adoption of the recently-launched Basal-IQ technology among healthcare providers is also expected to have contributed to the company’s fourth-quarter performance.

Tandem Diabetes is scheduled to report fourth-quarter results on Feb 24.

The company has an Earnings ESP of +86.44% and a Zacks Rank #2.

Tandem Diabetes Care, Inc. Price and EPS Surprise

 

Tandem Diabetes Care, Inc. Price and EPS Surprise

Tandem Diabetes Care, Inc. price-eps-surprise | Tandem Diabetes Care, Inc. Quote

Nevro Corp. NVRO: Nevro’s Senza Ominia product platform (launched in third-quarter 2019) is likely to have contributed to the company’s fourth-quarter 2019 performance. Moreover, the company’s solid international foothold is likely to have driven the company’s performance in the quarter to be reported. In fact, per management, growth in Europe is expected to drive worldwide revenues in 2019, a trend that is likely to get reflected in the to-be-reported quarter’s performance.

Nevro is slated to report fourth-quarter results on Feb 25.

The company has an Earnings ESP of +3.45% and a Zacks Rank #3.

Nevro Corp. Price and EPS Surprise

 

Nevro Corp. Price and EPS Surprise

Nevro Corp. price-eps-surprise | Nevro Corp. Quote

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>


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Stryker Corporation (SYK) : Free Stock Analysis Report
 
Abbott Laboratories (ABT) : Free Stock Analysis Report
 
Boston Scientific Corporation (BSX) : Free Stock Analysis Report
 
Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
 
HealthEquity, Inc. (HQY) : Free Stock Analysis Report
 
Nevro Corp. (NVRO) : Free Stock Analysis Report
 
Tandem Diabetes Care, Inc. (TNDM) : Free Stock Analysis Report
 
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