U.S. Markets closed

3 Medical Product Stocks Likely to Beat This Earnings Season

Zacks Equity Research

The Medical Products companies, within the broader Medical sector, have put up an impressive show so far this earnings season. Per the Earnings Preview, for the total number of S&P 500 members from the Medical sector, earnings improved 7.1% from the prior year comparable period on 8.2% higher revenues, with 72.2% of the companies beating both earnings and revenue estimates.

Per the report, total earnings of the sector are expected to be up 5.9% on 7% higher revenues.

The Zacks Medical Product sector has rallied 1.8% year to date. However, it currently carries a Zacks Sector Rank in the bottom 44% (141 out of 256 industries).

It is important to note here that the Medical Products companies within the broader Medical sector have been performing impressively in spite of certain quarterly volatilities. In fact, the ongoing US-China trade war is likely to have impacted the industry participants’ third-quarter performance. Nonetheless, favorable growth in the emerging markets and benefits obtained from innovation are likely to get reflected in the companies’ performance in this space this earnings season.

Over the past few months, the medical device space has witnessed exceptional progress when it comes to innovation — R&D to be precise. Some of the path-breaking inventions such as wireless brain sensors, Bluetooth-enabled smart inhalers, artificial pancreas, human-brain pacemaker, precision medicine, among others, have helped the medical device space to grow significantly. Abbott ABT registered strong top-line growth in the third quarter, banking on regulatory approvals for MitraClip, Alinity and FreeStyle Libre line.

Strong demand in the emerging markets is likely to have bolstered the performance of the industry participants in this reporting cycle. According to a MedTech Dive report, as stated by Moody’s, 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. Additionally, sales in emerging markets are anticipated to display a double-digit percentage rise over the same timeframe. Consequently, this trend is likely to get reflected in the performance of the industry players in this reporting cycle.

Backed by rising medical awareness and economic prosperity, emerging economies are witnessing strong demand for the medical products. In fact, a geriatric population, relaxed regulations, cheap skilled labor, increasing wealth and the government focus on healthcare infrastructure make these markets attractive to the global medical device players. In this regard, Varian Medical VAR has been leveraging its capability to treat cancer in emerging economies that are slightly under-equipped to address the prevalence of the same. According to a MedTech Dive report, in May 2019, Varian Medical strengthened presence in India by acquiring Cancer Treatment Services International for $283 million.

However, the U.S. Medical Products industry has encountered short-term hurdles pertaining to the U.S.-China trade war. Per a Medical Imaging & Technology Alliance (MITA) survey, tariffs will cost the companies nearly $138 million every year. This is anticipated to get reflected in the third-quarter performance of the industry players.

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.

GW Pharmaceuticals plc GWPH: The company has been witnessing continued rise in receptivity and demand for the medicine in the United States and also a huge number of physicians are recommending the same in their prescriptions. The trend is likely to have continued in the third quarter. The company’s third-quarter results are expected to reflect the impact of the expansion of the Epidiolex label to TSC on the favorable outcome of Phase 3 trial data for same and the treatment of seizures associated with tuberous sclerosis complex.

GW Pharmaceuticals PLC Price and EPS Surprise

 

GW Pharmaceuticals PLC Price and EPS Surprise

GW Pharmaceuticals PLC price-eps-surprise | GW Pharmaceuticals PLC Quote

GW Pharmaceuticals is scheduled to report third-quarter results on Nov 5.

The company has an Earnings ESP of +10.06% and a Zacks Rank #3.

Insulet Corporation PODD: Solid uptake of Omnipod system in the United States and overseas is likely to get reflected in the company’s third-quarter revenues. Also, probable revenue growth at the company’s Drug Delivery segment is likely to have boosted the company’s overall performance in the third quarter.

Insulet Corporation Price and EPS Surprise

 

Insulet Corporation Price and EPS Surprise

Insulet Corporation price-eps-surprise | Insulet Corporation Quote

Insulet is scheduled to report third-quarter results on Nov 5.

The combination of Insulet’s Earnings ESP of +64.10% and a Zacks Rank #3.

MacroGenics, Inc. MGNX: MacroGenics is a biopharmaceutical company that discovers and develops antibody-based therapeutics for the treatment of cancer in the United States. In the soon-to-be-reported quarter, the company is likely to have benefitted from its pipeline of immuno-oncology product candidates, which includes Margetuximab – the company’s novel, investigational immune optimized anti-HER2 antibody.

MacroGenics, Inc. Price and EPS Surprise

 

MacroGenics, Inc. Price and EPS Surprise

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

MacroGenics is slated to report third-quarter results on Nov 6.

The company has an Earnings ESP of +15.87% and a Zacks Rank #3.

Biggest Tech Breakthrough in a Generation

Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.

A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.

See 8 breakthrough stocks now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Abbott Laboratories (ABT) : Free Stock Analysis Report
 
Varian Medical Systems, Inc. (VAR) : Free Stock Analysis Report
 
GW Pharmaceuticals PLC (GWPH) : Free Stock Analysis Report
 
Insulet Corporation (PODD) : Free Stock Analysis Report
 
MacroGenics, Inc. (MGNX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research