Medical Device Stocks to Watch for Earnings on Nov 1: MCK & More
The third-quarter reporting cycle has just begun for the Medical sector (one of the 16 broad Zacks sectors within the Zacks Industry classification). Quarterly performances have been encouraging so far despite companies still recovering from inflationary pressures, supply-chain challenges and labor shortages.
The latest Earnings Preview indicates that 6.6% of the companies in the Medical sector, constituting nearly 24.7% of the sector’s market capitalization, reported earnings until Oct 18. Of these, 75% beat on earnings and revenue estimates. Earnings increased 5.6% year over year on 7.5% higher revenues.
Overall, the Medical sector’s third-quarter earnings are expected to have declined 15.4% despite a 5.1% sales increase. This compares with a second-quarter earnings decline of 29% despite 5.7% reported revenue growth. Per the latest trends, the Medical sector is one of the spaces that are expected to witness lower earnings among seven other sectors in the reporting cycle.
Medical Device Quarterly Synopsis
The scorecard so far shows positive outcomes, but the U.S. market is still uncertain, affecting most of the Medical sector for some time. Companies that trade internationally might have also faced currency challenges in the third-quarter months. However, some companies are likely to have benefited from foreign currency conversion. Meanwhile, rising inflation and the Fed's indication of increasing interest rates and maintaining a tight monetary policy based on economic data might have also increased costs.
Companies have been meeting the backlog of demand, which may have resulted in higher growth over the previous year’s level for the traditional core businesses. MedTech players who focused on COVID-19-related businesses have been gradually moving to non-COVID operations. This might have improved their performance in the third quarter of 2023.
Overall, the July-September months were marked by strength in product portfolios and solid customer adoption of products. Medical device companies like McKesson MCK, QuidelOrtho QDEL, Glaukos GKOS and Inari Medical NARI are likely to have been positively impacted by the tailwinds discussed above, despite facing headwinds on the macroeconomic front.
Let’s observe the status of four Medical device players, scheduled to announce results on Nov 1, 2023.
McKesson: The U.S. Pharmaceutical and Specialty Solutions segment is likely to have acted as a key growth driver in the third quarter. The segment is expected to have benefited from market growth and higher volumes from retail national account customers. However, branded-to-generic conversions might have weighed on its performance.
Continued demand for MCK’s broad spectrum of specialty biopharmaceutical products to health systems is likely to have contributed to its performance. Meanwhile, interest expenses are likely to have increased amid the rising interest-rate regime, thereby hurting the bottom line. (Read more: McKesson to Report Q2 Earnings: What's in the Cards?)
McKesson Corporation Price and EPS Surprise
McKesson Corporation price-eps-surprise | McKesson Corporation Quote
The Zacks Consensus Estimate for third-quarter earnings per share (EPS) is pegged at $6.11. The consensus estimate for revenues is pinned at $75.83 billion.
McKesson does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — which increases the odds of an earnings beat. MCK has an Earnings ESP of -1.20% and a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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QuidelOrtho: The uptick in third-quarter revenues is likely to have been driven by strong demand for QuidelOrtho’s retail and point-of-care offerings on the back of the presence of influenza and new variants of COVID-19 across the Northern Hemisphere.
On the second-quarter earnings call in August, QuidelOrtho’s management confirmed that the Labs instrument supply issues were expected to continue to improve as it moves through the second half of the year. This, along with the continued recovery in China, are expected to have driven the non-respiratory revenue uptick in the Labs segment.
At the time of the release of the preliminary third-quarter 2023 results, earlier this month, management stated that the earlier-than-expected arrival of respiratory illnesses has been driving greater demand for QuidelOrtho’s diagnostics.
In September, QuidelOrtho announced that it had been granted a CLIA Waiver by the FDA, which applies to its new Sofia 2 SARS Antigen+ FIA (fluorescent immunoassay). The Sofia 2 SARS Antigen+ FIA is now the first rapid antigen test to receive a CLIA waiver. The company may provide an update on its launch uptake during the third-quarter earnings call.
QuidelOrtho Corporation Price and EPS Surprise
QuidelOrtho Corporation price-eps-surprise | QuidelOrtho Corporation Quote
The Zacks Consensus Estimate for third-quarter 2023 EPS is pegged at 34 cents. The consensus mark for revenues is pinned at $937.3 million.
QDEL has an Earnings ESP of +0.56% and a Zacks Rank #4 (Sell) at present.
Glaukos: The company’s third-quarter results are likely to reflect continued recovery in the top line on the back of adoption of new and existing products. GKOS has launched several products, including iPrime, iAccess and iStent, in the past few quarters, which are aiding its revenue growth. The company has been focused on delivering improved outcomes for patients suffering from chronic eye diseases. It does so by continuing to develop a pipeline of novel, dropless platform technologies, designed to meaningfully advance the standard of care.
However, ongoing inflationary pressure is likely to have hurt GKOS’ operating margin in the soon-to-be-reported quarter.
Glaukos Corporation Price and EPS Surprise
Glaukos Corporation price-eps-surprise | Glaukos Corporation Quote
The Zacks Consensus Estimate for third-quarter 2023 EPS is pegged at a loss of 56 cents. The consensus estimate for revenues is pinned at $75.5 million.
GKOS has an Earnings ESP of 0.00% and a Zacks Rank #4 at present.
Inari Medical: The company’s core business is likely to have been driven by strong procedural growth across both its ClotTriever and FlowTriever product lines during the third quarter.
Moreover, NARI continues to progress well with the launch of Protrieve and InThrill. The company recorded continued adoption of FlowSaver — a device designed to be used with the FlowTriever System to reduce blood loss — in Europe. During the reported quarter, NARI launched two new products — RevCore and T16 Curve — both targeting patients with venous thromboembolism. These developments are likely to have aided NARI’s top-line growth.
However, ongoing inflationary pressure and the launch of new products are expected to have driven costs and expenses during the soon-to-be-reported quarter.
Inari Medical, Inc. Price and EPS Surprise
Inari Medical, Inc. price-eps-surprise | Inari Medical, Inc. Quote
The Zacks Consensus Estimate for third-quarter 2023 EPS is pegged at breakeven. The consensus estimate for revenues is pinned at $122.4 million.
NARI has an Earnings ESP of 0.00% and a Zacks Rank #2 at present.
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McKesson Corporation (MCK) : Free Stock Analysis Report
QuidelOrtho Corporation (QDEL) : Free Stock Analysis Report
Glaukos Corporation (GKOS) : Free Stock Analysis Report
Inari Medical, Inc. (NARI) : Free Stock Analysis Report
