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Medical Products' Jan 30 Earnings Roster: TMO, EW & More

Zacks Equity Research

Per the latest Earnings Preview, the Medical sector, is expected to report positive earnings growth in the fourth quarter. Medical sector earnings are expected to be up 3.6% on 5.4% higher revenues.

However, the projections indicate a sequential decline from the third quarter. Notably, the third quarter witnessed earnings growth of 6.2% on 7.2% revenue improvement.

The Medical Products companies, an integral part of this broader Medical sector, are expected to put up an impressive show this earnings season. The Medical Products companies have been performing impressively over the last few quarters in spite of certain quarterly volatilities. In fact, the ongoing US-China trade war is likely to have impacted the fourth-quarter performance of the industry participants. Nonetheless, favorable growth in the emerging markets and benefits obtained from innovation are likely to get reflected in the industry players’ performance this earnings season.

Over the past few months, the medical device space has witnessed exceptional progress with regards to innovation – R&D to be precise. Boston Scientific’s BSX heart failure predictor HeartLogic and Edwards Lifesciences’ Inspiris Resilia for patients with aortic heart valve are some path-breaking innovations that deserve mention in this context. Moreover, with AI-powered launches like polyp detector, autonomous AI imaging system for detecting skin cancer, diabetic retinopathy using retinal images, talking algorithm, drugstore chatbots and many more, the medical device space has been going from strength to strength.

Strong demand in the emerging markets is likely to have driven the performance of the industry participants in this reporting cycle. According to a MedTech Dive report, as stated by Moody’s in 2019,  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 expected to display a double-digit percentage rise this year. Consequently, this trend is likely to get reflected in the performance of the industry players in this reporting cycle.

In the fourth quarter, the government came up with its funding bills where it suspended Medical Device tax of 2.3%. This tax was originally enacted in 2013 as part of the Affordable Care Act (ACA). The burden of this 2.3% tax used to fall on the device manufacturer or importer. The suspension has come as a relief for medical device manufacturers, enabling them to channelize their funds into R&D. This is expected to have impacted fourth-quarter performance of the industry players.

However, the U.S.-China trade war triggered a short-term downtrend in the Medical Instruments sector. Despite a series of recent exemptions by the U.S. Trade Representative (USTR) and the introduction of the phase one trade deal, the industry is apprehensive about the impact that the trade war may have had on the fourth quarter. Going by a Forbes report, "medical device makers say there is impact to the industry and the threat of more tariffs to come in an ongoing trade war with China is troubling, hitting various parts of the medtech industry."

What Our Model Says

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 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 following four Medical Products behemoths that are set to release quarterly results on Jan 30.

Thermo Fisher Scientific Inc. TMO: Product launches through the second half of 2019 are expected to have driven revenues for the life science solutions segment in the fourth quarter of 2019.  

For the past few quarters, Thermo Fisher has been witnessing robust revenue growth and improvement in earnings performance, driven by continued focus on significant value creation from its R&D investments. In the last reported quarter, Thermo Fisher benefited from the launch of analytical instruments for the diagnostic laboratory. The company is expected to have continued gaining from the same in the fourth quarter.

Apart from this, the addition of Brammer Bio (a leader in viral vector manufacturing for gene and cell therapies), which expanded the company’s offering in the fast-growing gene therapy market, is likely to have contributed significantly to its fourth-quarter top line. (Read more: What’s in Store for Thermo Fisher in Q4 Earnings?)

Thermo Fisher has a Zacks Rank #3 and an Earnings ESP of +0.25%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher Scientific Inc. Price and EPS Surprise

 

Thermo Fisher Scientific Inc. Price and EPS Surprise

Thermo Fisher Scientific Inc. price-eps-surprise | Thermo Fisher Scientific Inc. Quote

Edwards Lifesciences Corporation EW: The company’s fourth-quarter 2019 results are expected to reflect strength in the core Critical Care product group. The segment has been showing solid growth across all product categories and geographies over the last few quarters. Management is optimistic about robust customer adoption of the HemoSphere all-in-one monitoring platform, particularly in the United States and Europe.  Further, within the Surgical Structural Heart Group, the company is gaining traction from solid aortic unit volume and continued adoption of its latest premium aortic valves. Strong rollout and steady acceptance of the INSPIRIS RESILIA aortic valve globally is likely to get reflected in the fourth-quarter sales.

Within the Transcatheter Aortic Valve Replacement (TAVR) arm, the company is expected to report strong fourth-quarter numbers on robust therapy adoption across all geographies with notable strength in the United States. The recent FDA indication expansion for SAPIEN 3 and SAPIEN 3 Ultra systems is also expected to have driven the company’s TAVR revenues in the fourth quarter. (Read more: Can Critical Care Aid Edwards Lifesciences Q4 Earnings?)

Edwards Lifesciences has a Zacks Rank #3 and an Earnings ESP of +4.48%.

Edwards Lifesciences Corporation Price and EPS Surprise

 

Edwards Lifesciences Corporation Price and EPS Surprise

Edwards Lifesciences Corporation price-eps-surprise | Edwards Lifesciences Corporation Quote

Baxter International Inc. BAX: New product launches, including PrisMax in the United States, and rising global demand for the company’s continuous renal replacement therapies is anticipated to have contributed to Baxter’s Acute Therapies business in the fourth quarter of 2019. This, in turn, is likely to have driven the segment’s fourth-quarter performance. Continued geographic expansion is expected to get reflected in the company’s fourth-quarter revenues. Notably, per the company’s preliminary announcement, revenues are anticipated to total $3 billion, up 7% year over year on a reported basis and 9% on an operational basis.

Moreover, the top line is anticipated to have benefited from Baxter’s strong product portfolio, and the planned launch of therapies and products. Per the preliminary announcement, geographic regions and all of the company’s six global business units is likely to have contributed to the fourth-quarter sales. (Read more: Baxter to Report Q4 Earnings: What’s in the Cards?)

Baxter has a Zacks Rank of 3 and an Earnings ESP of -0.66%.

Baxter International Inc. Price and EPS Surprise

 

Baxter International Inc. Price and EPS Surprise

Baxter International Inc. price-eps-surprise | Baxter International Inc. Quote

AmerisourceBergen Corporation ABC: Sustained growth in specialty product sales and expanding customer base at the company’s Pharmaceutical Distribution segment are likely to have benefited the fiscal first-quarter 2020 performance. Notably, this segment serves healthcare providers in the pharmaceutical supply channel. Solid organic growth rates in the U.S. pharmaceutical market, population demographics and improving patient access to medical care are likely to have contributed to the to-be-reported quarter’s top line. Further, the World Courier unit, in particular, is likely to have contributed to the Other segment’s performance in the fiscal first quarter.

This apart, the company is likely to have benefited from generics growth in the to-be-reported quarter. Further, new product launches are likely to have driven overall performance. (Read more: What’s in Store for AmerisourceBergen in Q1 Earnings?)

AmerisourceBergen has a Zacks Rank of 3 and an Earnings ESP of +0.82%.

AmerisourceBergen Corporation Price and EPS Surprise

 

AmerisourceBergen Corporation Price and EPS Surprise

AmerisourceBergen Corporation price-eps-surprise | AmerisourceBergen Corporation Quote

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