The Medical Products companies, within the broader Medical sector, have come up with decent performances so far this earnings season despite the coronavirus crisis, which has disrupted manufacturing and supply chain worldwide.
One of the primary reasons behind resilience of the medical space is continued strong business generation from emergency medical procedures that have been unavoidable even amid the pandemic. Also, this sector’s several new COVID-19-related healthcare supports have displayed significant prospects, thus contributing to first-quarter results.
Per the latest Earnings Preview, Medical is one of the five among the 16 major Zacks sectors that are set to report year-over-year earnings growth. Medical sector’s first quarter earnings are expected to be up 9.6% on 8.7% revenue growth.
Let us look at the trends that dominated the medical product stocks in the first quarter. One of the primary ones that worked in favor of these stocks was the revenue generated from the COVID-19 tests. In response to the public health crisis, the U.S. government declared a health emergency earlier this year and authorized the emergency use of IVD tests for the diagnosis of COVID-19. Authorizations for emergency PPE and emergency ventilator and ventilator substitutes followed eventually. In February, the FDA made a flexible decision to allow certain certified laboratories to urgently begin development of validated coronavirus diagnostics, subject to certain conditions.
Coming to Abbott’s ABT first-quarter results released on Apr 16, its Molecular Diagnostics, Rapid Diagnostics and Point of Care Diagnostics segments registered revenue growth on an organic basis. This can be attributed to the launch of two COVID-19 tests in March — the ID NOW COVID-19 molecular test (the fastest available molecular point-of-care test delivering results within 13 minutes and positive results in five minutes) and the RealTime SARS-CoV-2 molecular test, which runs on Abbott's m2000 RealTime System at hospitals and reference laboratories.
Moving on, emergency procedures have been gaining considerable momentum. With the pandemic intensifying since the beginning of February, the healthcare industry across the world started to postpone elective procedures to focus on COVID-19 treatments. However, emergency healthcare support (companies offering renal care, oncology support, diabetes management products) continued on its usual growth trajectory despite slight disruption.
Nevertheless, global supply chain disruption weighed on the first-quarter performance. The coronavirus outbreak has massively disrupted the global supply chain. Hence, companies with a huge international base are expected to have recorded a significant fall in their quarterly revenues.
Most of these device makers are likely to have gained from innovations, strategic consolidations and emerging market expansion till the time the COVID-19 onslaught was restricted to China.
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 fairly simple.
We are focusing on stocks that have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). 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.
Aurora Cannabis Inc. ACB: The company is likely to have witnessed revenue growth in third-quarter fiscal 2020 attributable to successful execution of growth and expansion strategy. Also, improvement in the company’s cash cost per gram might get reflected in gross margin on cannabis net revenues in the to-be-reported quarter.
Aurora Cannabis is scheduled to report fiscal third-quarter results on May 14.
The company has an Earnings ESP of +9.09% and a Zacks Rank #3.
Aurora Cannabis Inc Price and EPS Surprise
Aurora Cannabis Inc price-eps-surprise | Aurora Cannabis Inc Quote
Envista Holdings Corporation NVST: Growth initiatives in some key areas, and expansion and wider rollout of its clear aligner product — Spark — in the U.S. market, are likely to have contributed to the company’s first-quarter 2020 performance. Also, the company might have experienced operating margin expansion attributable to productivity initiatives.
Envista Holdings is slated to report first-quarter results on May 11.
The company has an Earnings ESP of +39.39% and a Zacks Rank #3.
Envista Holdings Corporation Price and EPS Surprise
Envista Holdings Corporation price-eps-surprise | Envista Holdings Corporation Quote
Eagle Pharmaceuticals, Inc. EGRX: New Drug Application (NDA) filing for exertional heat stroke (EHS), partnership with North Shore HealthSystem for traumatic brain injury, collaboration with the University of Pennsylvania on Alzheimer’s disease and the final FDA approval and settlement with Eli Lilly for PEMFEXY (pemetrexed for injection) are likely to have benefited the company’s first-quarter 2020 performance.
Eagle Pharmaceuticals is slated to report first-quarter results on May 12.
The company has an Earnings ESP of +17.02% and a Zacks Rank #3.
Eagle Pharmaceuticals Inc Price and EPS Surprise
Eagle Pharmaceuticals Inc price-eps-surprise | Eagle Pharmaceuticals Inc Quote
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Abbott Laboratories (ABT) : Free Stock Analysis Report
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Envista Holdings Corporation (NVST) : Free Stock Analysis Report
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