MedTech Stocks to Watch for Earnings on Aug 1: ECL, NVRO, INSP
The second-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 17.2% of the companies in the Medical sector, constituting nearly 35.2% of the sector’s market capitalization, reported earnings until Jul 26. Of these, 90% beat earnings and revenue estimates. Earnings increased 3.1% year over year on 12.8% higher revenues.
Overall, second-quarter earnings of the Medical sector are expected to decline 31.2% despite a 3.3% sales increase. This compares with first-quarter earnings decline of 17.9% despite 4% reported revenue growth. Per the latest trends, the Medical sector is one of the spaces expected to witness negative earnings estimate revisions among eight other sectors in the reporting cycle.
MedTech Quarterly Synopsis
Although the scorecard so far reflects encouraging results, uncertain market conditions within the United States, with the majority of the players in the Medical sector reeling under an uncertain macroeconomic environment for a while, prevail. Through the second-quarter months, the companies, which are into international trade, are also expected to have faced currency headwinds. However, foreign currency translation may have been a tailwind for some companies. During this period, the U.S. dollar has mixed performance, remaining relatively stable against major currencies. Meanwhile, ongoing inflationary pressure and rising interest rates are likely to have driven expenses higher.
On a positive note, companies have been successfully addressing pent-up demand, which is likely to have led to higher year-over-year growth within the legacy base businesses. MedTech players who were very much into COVID-19-related businesses have been gradually shifting their business into non-COVID operations. This is the path being followed by Becton Dickinson and Company BDX, popularly known as BD. The company has been continuing to register a decline in COVID-only testing revenues over the past few months. However, on the second quarter of fiscal 2023 earnings call, management stated that its base revenue growth and consistent execution of its margin goals are enabling BD to offset lower COVID-only testing revenues and the latest foreign exchange rates while reinvesting in the business to drive future growth.
Overall, the April-June months were marked by strength in product portfolios and solid customer adoption of products. MedTech companies like Ecolab Inc. ECL, Nevro Corp. NVRO and Inspire Medical Systems, Inc. INSP are likely to have been positively impacted by the tailwinds discussed above, despite encountering turbulence on the macroeconomic front.
Let’s observe the status of three MedTech players, scheduled to announce results on Aug 1, 2023.
Ecolab: Ecolab’s Global Industrial segment, comprising the Water, Food & Beverage, Paper and Downstream units, was an important contributor to the company’s top-line growth in the first quarter of 2023. The water business has been performing well for the past few months. Per management, volume has been positive as it has been helping its customers to produce better and more products while reducing their water usage. With a reduction in water usage, customers can reduce their energy usage, carbon footprint and, in turn, their costs. This will likely make them invest in Ecolab. This is likely to have significantly boosted the company’s second-quarter revenues. (Read more: Ecolab to Report Q2 Earnings: What's in the Offing?)
The Zacks Consensus Estimate for second-quarter 2023 earnings is pegged at $1.21 per share. Revenues are expected to be $3.87 billion.
Ecolab Inc. Price and EPS Surprise
Ecolab Inc. price-eps-surprise | Ecolab Inc. Quote
Ecolab 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. ECL has an Earnings ESP of +0.50% 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.
Nevro: Nevro’s second-quarter 2023 revenues are likely to have been aided by the customer adoption of its HFX iQ Spinal Cord Stimulation System in the United States, the first powered by artificial intelligence. This follows its commencement of the full launch during the first quarter of 2023. The continued robust PDN indication sales and U.S. permanent implant procedures are also likely to have significantly contributed to Nevro’s revenues in the to-be-reported quarter.
The Zacks Consensus Estimate for second-quarter 2023 loss is pegged at 68 cents per share. Revenues are expected to be $109.3 million.
Nevro Corp. Price and EPS Surprise
Nevro Corp. price-eps-surprise | Nevro Corp. Quote
NVRO has an Earnings ESP of 0.00% and a Zacks Rank #3.
Inspire Medical: Inspire Medical received the FDA’s approval to offer Inspire therapy to pediatric patients with Down syndrome in March. The same month, the company received countrywide reimbursement approval in Belgium, effective immediately, at rates consistent with other countries around the world. These are likely to have significantly driven Inspire Medical’s revenues on the back of solid customer adoption. The company is also likely to have benefited from its activation of new centers in the United States and the creation of new U.S. sales territories in the to-be-reported quarter. In June, Inspire Medical received the FDA’s approval to expand its indication to include patients with Apnea Hypopnea Index of up to 100 events per hour, raising our optimism.
The Zacks Consensus Estimate for second-quarter 2023 loss is pegged at 51 cents per share. Revenues are expected to be $137.7 million.
Inspire Medical Systems, Inc. Price and EPS Surprise
Inspire Medical Systems, Inc. price-eps-surprise | Inspire Medical Systems, Inc. Quote
INSP has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).
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Ecolab Inc. (ECL) : Free Stock Analysis Report
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Nevro Corp. (NVRO) : Free Stock Analysis Report
Inspire Medical Systems, Inc. (INSP) : Free Stock Analysis Report
