Medical Device Stocks' Q3 Earnings Due on Oct 26: BSX, BIO & More
The third-quarter earnings season for the Medical sector has kicked off. Per the latest Earnings Preview, quarterly results so far have improved year over year despite the ongoing macroeconomic headwinds in the form of worldwide inflationary pressure and unfavorable foreign exchange headwind. Going by the sector’s scorecard, 6.6% of the companies in the Medical sector, constituting 24.7% of the sector’s market capitalization, reported earnings till Oct 18. Of these, 100% beat earnings while 75% beat revenue estimates. Earnings improved 5.6% year over year on 7.5% higher revenues.
However, overall, third-quarter earnings of the Medical sector are expected to plunge 15.4% despite 5.1% revenue growth. This compares with the second-quarter earnings decline of 29% on revenue growth of 5.7%.
The projection reflects the ongoing global inflationary pressure, which has resulted in an extremely tough situation related to raw material, labor cost, higher medical expenses, as well as freight charges, putting the industry in a tight spot again. The majority of the players within this space witnessed a rise in raw material costs and other expense pressure through the third-quarter months. Added to this, labor-supply constraints due to an increase in labor costs and global supply-chain hazards are expected to have moderated the growth process.
Medical Device Quarterly Synopsys
Replicating the market-wide trend, Medical Device or the Zacks-defined Medical Products companies’ collective business growth in the third quarter is likely to have been significantly dampened by the ongoing macroeconomic threat in the United States and outside. Through the third-quarter months, the companies that are into international trade are expected to have faced severe currency headwind. During this period, the U.S. dollar strengthened compared to several foreign currencies, which might have resulted in severe currency headwinds for Medical Device companies’ businesses compared to the last reported quarter.
Further, going by the industry-wide trend, logistical challenges and increasing unit costs are likely to have weighed heavily on the corporate profitability of stocks across the board. This difficult macro environment continues to restrict capital investments in the third quarter, impacting the overall performance of the sector. At the same time, to tackle mounting expenses, the companies are accelerating their cost-reduction initiatives.
Meanwhile, the tightened monetary policy starkly altered consumer preferences and once again put the demand for the non-essential category line of medical device businesses on the back foot. This might have, in a way, shrunk the companies’ revenues in the third quarter compared to the prior quarter.
Also, diagnostic testing companies might have once again witnessed a severe year-over-year decline in testing demand, compared to a strong comparison in the year-ago period on the rise in new COVID-19 cases in select geographies.
Medical device companies like Boston Scientific BSX, BioRad Laboratories BIO, Edwards Lifesciences EW and Labcorp LH are likely to have been influenced by these abovementioned factors in the third quarter.
On a positive note, companies’ successful addressing of a couple of years’ pent-up demand is likely to have led to higher year-over-year growth within the legacy base businesses. During the post-pandemic phase, the key focus of medical device R&D shifted from COVID-related PPE, testing and distant care options to point-of-care testing, heavy as well as minimally invasive implants, elective procedures and so forth. Accordingly, legacy-based business recovery and testing demand of the companies through the months of the third quarter are expected to have been impressive. Meanwhile, AI and robotics for the medical Internet of Things (IoT), which rose to the limelight during the pandemic phase, remained popular.
Let's take a look at four Medical Device players scheduled to announce third-quarter results on Oct 26.
Boston Scientific: Given the improving scenario in terms of hospital visits and elective medical procedures, an innovative pipeline, expansion into faster growth markets, globalization efforts and enhanced digital capabilities, BSX is well-positioned to register decent third-quarter 2023 results. However, the rate of growth is expected to have remained sluggish amid a challenging supply environment in limited geographies, particularly in Europe, through the months of the third quarter. Further, given the ongoing inflationary situation, the business is expected to have faced the hurdle of surging labor and raw material costs, which might have weighed on BSX’s bottom line in the third quarter.
(Read more: What's in Store for Boston Scientific in Q3 Earnings?)
The Zacks Consensus Estimate for third-quarter total revenues is pegged at $3.47 billion, suggesting an improvement of 9.3% from the prior-year quarter’s reported number. The consensus mark for adjusted earnings stands at 48 cents per share, implying an 11.6% rise from the year-ago quarter’s reported figure
Per our proven model, a stock with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates. This is not the case as you can see below.
BSX has an Earnings ESP of 0.00% and carries a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Boston Scientific Corporation Price and EPS Surprise
Boston Scientific Corporation price-eps-surprise | Boston Scientific Corporation Quote
Bio-Rad: The company’s Life Science segment is likely to have witnessed year-over-year currency-neutral core revenue growth in the third quarter, driven by strong growth in Droplet Digital PCR and qPCR products. On the supply-chain front, Bio-Rad achieved the extended backlog reduction target during the second quarter and does not foresee any constraints related to product supply in the second half of the year. We believe this to have benefited BIO’s top line in the to-be-reported quarter.
(Read more: Bio-Rad Laboratories to Post Q3 Earnings: What Awaits?)
The Zacks Consensus Estimate for Bio-Rad’s third-quarter 2023 revenues is pegged at $690.6 million, suggesting a rise of 1.5% from the year-ago reported figure. The Zacks Consensus Estimate for its third-quarter 2023 EPS of $2.87 indicates a year-over-year rise of 10.4%.
BIO has an Earnings ESP of +0.18% and carries a Zacks Rank #4 (Sell).
Bio-Rad Laboratories, Inc. Price and EPS Surprise
Bio-Rad Laboratories, Inc. price-eps-surprise | Bio-Rad Laboratories, Inc. Quote
Edwards Lifesciences: Similar to the last reported quarter, Edwards Lifesciences is likely to have gained from its patient-focused innovation strategy. The strong therapy adoption of transcatheter heart valves is expected to have driven the majority of growth in the third quarter, aided by consistent performance of the Critical Care arm and Transcatheter Heart Valves. Within the Transcatheter Aortic Valve Replacement (TAVR) arm, Edwards Lifesciences is likely to have witnessed continued growth in TAVR procedures across the United States and worldwide. In Critical Care, continued demand for its state-of-the-art HemoSphere monitoring platform and Smart Recovery will likely be reflected in the third-quarter results.
(Read more: What's in Store for Edwards Lifesciences in Q3 Earnings?)
The Zacks Consensus Estimate for the company’s third-quarter 2023 revenues is pegged at $1.48 billion, suggesting a rise of 12.4% from the year-ago reported figure. The Zacks Consensus Estimate for third-quarter 2023 net earnings of 59 cents indicates a 3.3% decline from the year-ago reported figure.
EW has an Earnings ESP of +3.06% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Edwards Lifesciences Corporation Price and EPS Surprise
Edwards Lifesciences Corporation price-eps-surprise | Edwards Lifesciences Corporation Quote
Labcorp: It is expected to have witnessed a significant reduction in COVID-19 PCR and antibody testing. This is likely to have hampered Labcorp’s overall sales performance in the to-be-reported quarter. The company expects testing revenues to decline 85%-89% in the third quarter compared to the reported figure in 2022. However, the legacy Diagnostics Laboratories business is expected to have witnessed an improved performance, driven by strong base business volumes. The Ascension lab management agreement may have also contributed to the organic growth of the business.
(Read more: Labcorp to Report Q3 Earnings: What's in the Cards?)
The Zacks Consensus Estimate for LH’s third-quarter 2023 revenues is pegged at $2.99 billion. This suggests a 17% fall from the year-ago reported figure. The Zacks Consensus Estimate for its third-quarter 2023 EPS of $3.50 indicates a year-over-year decrease of 25.2%
Labcorp has an Earnings ESP of +0.15% and a Zacks Rank #3.
Labcorp Price and EPS Surprise
Labcorp price-eps-surprise | Labcorp Quote
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