Per the latest Earnings Preview, the Medical sector is poised to report earnings growth for the fourth quarter of 2019. Notably, earnings from this sector are expected to be up 4.9% on 5.6% higher revenues.
A few releases by key Medical Products companies include that of 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%.
Let’s take a look at the factors, which are likely to drive the sector’s earnings this time around.
According to a MedTech Dive report, as stated by Moody’s in 2019, medical device makers are likely to exhibit mid-single-digit revenue growth on product innovation throughout 2019.
Notably, digital health is at the forefront, paving the way for partnerships between digital health companies, payers and care providers.
IoT has also started to play a significant role in medical devices. AI-powered launches in the quarter like polyp detector, autonomous AI imaging system for detecting skin cancer, diabetic retinopathy using retinal images are path-breaking. Boston Scientific’s BSX heart failure predictor HeartLogic and Medtronic’s MDT Activa Patient Programmer for Deep Brain Stimulation therapy deserve a mention in this regard.
Apart from this, the government’s suspension of the 2.3% Medical Device tax in December is expected to have driven innovation by enabling medical device manufacturers channelize funds into R&D.
Additionally, sales in the emerging markets are expected to have witnessed double-digit rise in 2019, which in turn should reflect on the medical product companies’ fourth-quarter results. Product innovation and the ever-increasing medical needs in emerging markets open up tremendous opportunity for medical device companies. 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.
Geo-political tensions should reflect on fourth-quarter results.
Uncertainties over the U.S.-China trade scenario still loom large. Despite a series of recent exemptions by the U.S. Trade Representative and the signing of the phase-one trade deal, the medical fraternity apprehends an impact on fourth-quarter results.
In the light of the above discussions, let’s take a look at four Medical Products behemoths that are set to release quarterly results on Feb 6.
Becton, Dickinson and Company BDX: Popularly known as BD, this company’s first-quarter fiscal 2020 performance is expected to have been driven by its core Life Sciences segment. Strong year-over-year growth in revenues from assays, which are used to detect a broad range of infectious diseases, healthcare-associated infections and cancer, are expected to have been key catalysts. Notably, strong performance by the Diagnostic Systems and Biosciences sub-units is expected to have worked in favor.
BD also expects its Critical Care business and the Arctic Sun Stat launch under its Interventional arm to have driven the segment’s first-quarter revenues.
Management expects BD Life Sciences and Interventional arms to see strong double-digit growth in China, while BD Medical is likely to witness single-digit growth. (Read More: BD Life Sciences to Aid Becton, Dickinson Q1 Earnings)
According to the Zacks 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.
Becton, Dickinson has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Becton, Dickinson and Company Price and EPS Surprise
Becton, Dickinson and Company price-eps-surprise | Becton, Dickinson and Company Quote
Cardinal Health, Inc. CAH: Cardinal Health’s Pharmaceutical segment, the second-largest pharmaceutical distributor in the United States, is expected to have driven the company’s second-quarter performance.
Moreover, contributions from Specialty Solutions, better brand sales and mix, and benefits from cost-saving initiatives are likely to have driven the segment’s profits.
Cardinal Health’s Medical unit is also likely to have contributed significantly. Management estimates an incremental $130 million in cost savings in fiscal 2020 related to actions intended to optimize and simplify the company's operating model and cost structure. This in turn is likely to aid the company’s margins in the to-be-reported quarter.
However, stiff competition is likely to get reflected in segmental margins and consequently profitability (Read More: What's in Store for Cardinal Health's Q2 Earnings?)
Cardinal Health has a Zacks Rank #3 and an Earnings ESP of -5.19%.
Cardinal Health, Inc. Price and EPS Surprise
Cardinal Health, Inc. price-eps-surprise | Cardinal Health, Inc. Quote
10x Genomics Inc. TXG: 10x Genomics expects to have gained from its core Chromium Instruments platform, which is a major driver of revenues. Moreover, a strong product portfolio and continuous product launches are considered key catalysts. Notably, the company recently launched the Visium Spatial Gene Expression Solution, which is expected to have enabled unbiased large-scale gene expression measurements with spatial information.
Management also expects the acquisition of Spatial Transcriptomics to have proven accretive.
The company expects full-year revenues within $238-$242 million, calling for growth of 63-65% over 2018.
However, higher accrued royalties and surging operating expenses are likely to dent the company’s margins.
10x Genomics has a Zacks Rank #3 and an Earnings ESP of 0.00%.
10x Genomics Inc. Price and EPS Surprise
10x Genomics Inc. price-eps-surprise | 10x Genomics Inc. Quote
ABIOMED, Inc. ABMD: ABIOMED expects the solid Impella product line prospects to show on its third-quarter fiscal 2020 results. Notably, Impella has consistently boosted the company’s top line and is expected to have driven earnings as well. The platform’s treatment success rates and plethora of regulatory approvals are expected to have driven demand.
A solid show by ABIOMED’s SmartAssist, Impella Connect, IQ Impella Quality Assurance Database and Impella 5.0 is expected to reflect in the quarterly results.
Notably, ABIOMED’s preliminary results project U.S. patient usage growth of 16% year over year and international growth of 24%. U.S. revenues are expected to have grown 8% year over year to $185.6 million. Internationally, revenues are estimated at $36.0 million, suggesting a 29% year-over-year rise on strength in Germany and Japan.
However, the quarterly revenues are anticipated at $221.6 million, suggesting a 10% year-over-year rise but the metric is expected to lag the consensus mark.
Resultantly, the company slashed its fiscal 2020 revenue guidance. (Read More: ABIOMED to Report Q3 Earnings: What's in the Offing?)
ABIOMED has a Zacks Rank #4 and an Earnings ESP of 0.00%.
ABIOMED, Inc. Price and EPS Surprise
ABIOMED, Inc. price-eps-surprise | ABIOMED, Inc. Quote
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