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 discouraging so far. Per the latest trends, the Medical sector is one of the spaces witnessing negative estimate revisions among seven other sectors since mid-April.
The latest Earnings Preview indicates that 23.2% of the companies in the Medical sector, constituting nearly 43% of the sector’s market capitalization, reported earnings until Oct 26. Earnings decreased 1.8% year over year despite 7.5% higher revenues. A total of 76.9% of the companies’ earnings as well as revenues beat the Zacks Consensus Estimate.
The scorecard so far reflects unstable market conditions within the United States as the majority of the players in the Medical sector have been reeling under an uncertain macroeconomic environment for a while. Though the majority of the players in the Medical sector have been holding their ground on the back of strong consumer demand, their operations in challenging market conditions are taking a toll on their quarterly performances. The current supply-chain constraints and inflationary pressure are expected to linger at least for the next few months, thereby putting pressure on the Medical sector’s overall performance. Overall, third-quarter earnings of the Medical sector are expected to decline 8.3% despite a 3.8% sales increase. This compares with second-quarter earnings growth of 6.5% on 9.9% reported revenue growth.
MedTech Quarterly Synopsis
The MedTech companies’ collective business growth is likely to have deteriorated from the comparable prior-year period’s performance. This year, COVID-led fatality across the United States and other developed countries has declined significantly thus far. Additionally, notable MedTech players have been making consistent efforts to mitigate staffing shortages that have disrupted business growth. However, continued supply chain-induced constraints, inflationary pressure and an overall unstable macroeconomic business environment are likely to have dampened the overall recovery of the MedTech players following the prior-year’s pandemic-induced challenges.
Although the countries have been lifting COVID-19 restrictions over the past few months (barring a few regions), the continuous reopening of economies might still not have been sufficient to boost the growth process in the September quarter amid a tough business climate. These factors are likely to have significantly weighed on the performances of several businesses of the MedTech sector during the third quarter.
Overall, the strength in the product portfolios and solid customer adoption of the products through the July-September months are expected to have been impressive. MedTech companies like McKesson Corporation MCK, Catalent, Inc. CTLT, Ecolab Inc. ECL, Abiomed, Inc. ABMD, Henry Schein, Inc. HSIC and IDEXX Laboratories, Inc. IDXX are likely to have been positively impacted by the tailwinds discussed above, despite encountering turbulences on the macroeconomic front.
Let’s observe the status of six MedTech players, scheduled to announce results on Nov 1.
McKesson: McKesson’s U.S. Pharmaceutical and Specialty Solutions segment is likely to have benefited from market growth and higher volumes from retail national account customers in second-quarter fiscal 2023. However, branded-to-generic conversions might have weighed on the segment’s performance. In July 2022, the U.S. government renewed the existing COVID-19 vaccine distribution contract with McKesson. The company continues to reap benefits from its COVID-related programs in Canada and European operations. (Read more: McKesson to Report Q2 Earnings: Is a Beat in the Cards?)
The Zacks Consensus Estimate for second-quarter fiscal 2023 earnings is pegged at $6.13 per share. Revenues are expected to have been $69.66 billion.
McKesson Corporation Price and EPS Surprise
McKesson Corporation price-eps-surprise | McKesson Corporation Quote
McKesson has 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 +0.27% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Catalent: Catalent’s fiscal 2023 first-quarter top line is likely to have been boosted by continued strength in its Biologics segment on the back of a broad base of service offerings. However, lower revenues from its COVID-19-related programs over the past few months are likely to have weighed on Catalent’s fiscal first-quarter revenues. (Read more: Catalent to Report Q1 Earnings: What's in the Cards?)
The Zacks Consensus Estimate for Catalent’s earnings for the fiscal first quarter is pegged at 55 cents per share. Revenues are expected to be $1.06 billion.
Catalent, Inc. Price and EPS Surprise
Catalent, Inc. price-eps-surprise | Catalent, Inc. Quote
CTLT has an Earnings ESP of +3.74% and a Zacks Rank #4 (Sell).
Ecolab: Ecolab’s Global Industrial segment is likely to have benefited from continued strength in its Water business, thereby considerably driving the third-quarter 2022 top line. However, Ecolab confirmed on its second-quarter earnings call in July that the dine-in traffic in U.S. restaurants was still down. Although the traffic has considerably recovered, it is likely to have been suppressed in the third quarter as well. This is expected to have partially weighed on the to-be-reported quarter’s revenues. (Read more: Ecolab to Report Q3 Earnings: What's in the Offing?)
The Zacks Consensus Estimate for Ecolab’s earnings for the third quarter is pegged at $1.33 per share. Revenues are expected to be $3.68 billion.
Ecolab Inc. Price and EPS Surprise
Ecolab Inc. price-eps-surprise | Ecolab Inc. Quote
ECL has an Earnings ESP of -1.93% and a Zacks Rank #3.
Abiomed: The sustained adoption of Abiomed’s Impella 5.5 with SmartAssist across the globe over the past few months is likely to have significantly driven the overall top line in the second quarter of fiscal 2023. Abiomed’s Impella CP and Impella RP with SmartAssist are also likely to have witnessed strong customer adoption in the to-be-reported quarter. This, along with growth in patient utilization and site openings in Japan, are likely to have driven revenues in the fiscal second quarter. (Read more: Abiomed to Report Q2 Earnings: What's in the Cards?)
The Zacks Consensus Estimate for Abiomed’s earnings for the fiscal second quarter is pegged at $1.04 per share. Revenues are expected to be $273.3 million.
Abiomed, Inc. Price and EPS Surprise
Abiomed, Inc. price-eps-surprise | Abiomed, Inc. Quote
ABMD has an Earnings ESP of +4.18% and a Zacks Rank #3.
Henry Schein: Henry Schein’s dental business in the third quarter of 2022 is likely to have gained from improved patient traffic as COVID-led severity gradually declines globally. The dental business is likely to have seen robust sales contributions from dental specialty products, specifically within the oral surgery category. Henry Schein, in July 2022, acquired Condor Dental, which is expected to extend its foray into the Swiss market for its dental distribution business. We expect this buyout to have a beneficial impact on the company’s results for the to-be-reported quarter. (Read more: Henry Schein to Report Q3 Earnings: What's in Store?)
The Zacks Consensus Estimate for Henry Schein’s earnings for the third quarter is pegged at $1.15 per share. Revenues are expected to be $3.22 billion.
Henry Schein, Inc. Price and EPS Surprise
Henry Schein, Inc. price-eps-surprise | Henry Schein, Inc. Quote
HSIC has an Earnings ESP of -1.42% and a Zacks Rank #4.
IDEXX Laboratories: IDEXX’s Companion Animal Group (CAG) business is expected to have gained from consistent strong organic in the third quarter. CAG Diagnostics recurring revenues are likely to have been backed by an increasing number of pet patients. With a gradual decline in pandemic severity, we anticipate growth in U.S. clinical visits to lead to substantial CAG Diagnostic recurring revenue gains in Q3. Sales contributions from veterinary software and diagnostic imaging, including the benefits from the ezyVet acquisition, are likely to have been advantageous for the business in the to-be-reported quarter. (Read more: IDEXX to Report Q3 Earnings: What's in the Cards?)
The Zacks Consensus Estimate for IDEXX’s earnings for the third quarter is pegged at $2.04 per share. Revenues are expected to be $829.2 million.
IDEXX Laboratories, Inc. Price and EPS Surprise
IDEXX Laboratories, Inc. price-eps-surprise | IDEXX Laboratories, Inc. Quote
IDXX has an Earnings ESP of -0.70% and a Zacks Rank #3.
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Ecolab Inc. (ECL) : Free Stock Analysis Report
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