The Medical Products companies, within the broader Medical sector, are likely to put up a superb show this earnings season. Focus on research and development is a key growth strategy for companies in this space. Currently, these players are benefiting from R&D innovation, courtesy of the 2.3% Medical Device tax abolition earlier in 2018.
Solid growth in emerging markets is expected to be an added positive this earnings season. Backed by rising medical awareness and economic prosperity, emerging economies are witnessing solid demand for medical products. Notably, an aging population, relaxed regulations, cheap skilled labor, increasing wealth and government focus on healthcare infrastructure make these markets a happy hunting ground for global medical device players.
Per the latest Earnings Trends report, the Medical sector is expected to record solid earnings growth this reporting cycle (as of Jan 23). For the quarter under review, earnings growth rate is projected at 7.7% on 6.1% revenue growth.
However, the U.S. Medical Products industry has confronted short-term hurdles pertaining to the trade war with China. According to a survey conducted by the Medical Imaging & Technology Alliance (MITA), tariffs will cost the companies nearly $138 million every year.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Conversely, a Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if the companies are witnessing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Considering the above factors, we take a look at the five Medical Products behemoths that are set to release results on Jan 31.
Edwards Lifesciences Corporation EW
In the fourth quarter of 2018, the company is expected to gain from strength in Critical Care product group. This segment has been witnessing solid growth across all product categories.
Edwards Lifesciences is also set to keep benefiting from Critical Care technologies with the rollout of HemoSphere monitoring platform supported by new group purchasing organization contracts in the United States (read more: What's in Store for Edwards Lifesciences' Q4 Earnings?).
The Zacks Consensus Estimate for fourth-quarter revenues is pinned at $973.7 million, indicating a year-over-year increase of 9.6%. The same for earnings is pegged at $1.17, reflecting a 24.5% rise year over year. In the trailing four quarters, the company exceeded the consensus mark, the average being 7.8%.
Edwards Lifesciences’ Earnings ESP of +0.86% and a Zacks Rank #3, make us confident about an earnings beat this season. You can see the complete list of today’s Zacks #1 Rank stocks here.
Edwards Lifesciences Corporation Price and Consensus
Edwards Lifesciences Corporation Price and Consensus | Edwards Lifesciences Corporation Quote
Baxter International Inc. BAX)
The company is expected to see steady growth in the fourth quarter on the back of strength in its core Renal Care segment. An upbeat earnings view for 2018 also buoys optimism. Baxter’s Renal Care segment, which offers improved dialysis solutions for patients, is expected to provide a boost to its fourth-quarter results. It is encouraging to note that the Zacks Consensus Estimate for the unit’s fourth-quarter revenues stands at $951 million, reflecting a sequential rise of 4.5%.
For the segment’s U.S. revenues, the consensus mark is pinned at $212 million, up 1.4% sequentially. Meanwhile, the Zacks Consensus Estimate for the segment’s international sales is pegged at $728 million, mirroring a sequential rise of 3.9% (read more: Will Core Renal Care Unit Fuel Baxter's Q4 Earnings?).
Baxter has an Earnings ESP of +1.83% and a Zacks Rank #3, which increase the chances of an earnings beat in the to-be-reported quarter.
Baxter International Inc. Price and Consensus
Baxter International Inc. Price and Consensus | Baxter International Inc. Quote
McKesson Corporation MCK)
In the third quarter of fiscal 2019, McKesson’s core business units — U.S. Pharmaceutical and Specialty Solutions, and European Pharmaceutical Solutions — are likely to boost its quarterly performance.
Notably, the Pharmaceutical Solutions segment is likely to gain momentum on the back of its branded, generic and over-the-counter pharmaceuticals. This apart, McKesson’s Specialty business is likely to be a major top-line contributor, with solid growth in specialty drug distribution. For the quarter to be reported, the Zacks Consensus Estimate for the U.S. Pharmaceutical and Specialty Solutions is pegged at $43.01 billion, showing a sequential rise of 3.4% (read more: Will Core Business Units Boost McKesson's Q3 Earnings?).
The Zacks Consensus Estimate for the fiscal third quarter revenues is pinned at $55.27billion, indicating a year-over-year increase of 3.1%. The same for earnings is $3.18, reflecting a 6.8% decline year over year. In the trailing four quarters, the company exceeded the consensus mark, the average being 7.8%.
McKesson has a Zacks Rank #3 and an Earnings ESP of -0.08%, a combination that hints at slim chances of a beat in the third quarter of fiscal 2019.
McKesson Corporation Price and Consensus
McKesson Corporation Price and Consensus | McKesson Corporation Quote
ABIOMED, Inc. ABMD)
In the third quarter of fiscal 2019, ABIOMED is set to gain from its flagship Impella product line. Notably, ABIOMED has been progressing well with SmartAssist, Impella Connect, IQ Impella Quality Assurance Database, cVAD and NCSI platforms. Furthermore, there is a growing physician awareness on Impella's ability to protect against acute kidney injury (read more: Will Flagship Impella Drive ABIOMED's Q3 Earnings?).
The Zacks Consensus Estimate for ABIOMED’s fiscal third-quarter earnings is pegged at 94 cents, mirroring 34.3% improvement year over year. The same for revenues stands at $200.6 million, reflecting an increase of 30.2% year over year.
Our model predicts a positive earnings surprise by ABIOMED in the third quarter of fiscal 2019. This is because the stock has an Earnings ESP of +2.60% and a Zacks Rank #3.
ABIOMED, Inc. Price and Consensus
ABIOMED, Inc. Price and Consensus | ABIOMED, Inc. Quote
AmerisourceBergen Corporation ABC)
Increasing volume and an expanding customer base at the Pharmaceutical Distributionsegment are likely to boost AmerisourceBergen’srevenues in the first quarter of fiscal 2019. This segment serves healthcare providers in the pharmaceutical supply channel. The Zacks Consensus Estimate for Pharmaceutical Distribution’s revenues stands at $40.46 billion, mirroring an improvement of 11.5% from the year-ago quarter number (read more: AmerisourceBergen Q1 Earnings: What's in the Cards?).
For the quarter to be reported, the consensus mark for revenues is pegged at $43.52 billion, reflecting 7.5% growth year over year. The same for earnings stands at $1.50, indicating year-over-year decline of 3.2%.
AmerisourceBergen has a Zacks Rank #3 and an Earnings ESP of -0.95%, a combination that hints at slim chances of a beat in the first quarter of fiscal 2019.
AmerisourceBergen Corporation Price and Consensus
AmerisourceBergen Corporation Price and Consensus | AmerisourceBergen Corporation Quote
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
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