MedTech Stocks to Watch for Earnings on Oct 26: WST, DXCM & 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 earnings and revenue estimates. Earnings increased 5.6% year over year on 7.5% higher revenues.
Overall, third-quarter earnings of the Medical sector are expected to decline 15.4% despite a 5.1% sales increase. This compares with second-quarter earnings decline of 29% despite 5.7% reported revenue growth. Per the latest trends, the Medical sector is one of the spaces expected to witness lesser earnings among seven 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 third-quarter months, the companies that are into international trade are also expected to have faced currency headwinds. However, foreign currency translation may have been a tailwind for some companies. Meanwhile, ongoing inflationary pressure and the Federal Reserve’s hint of the need to raise interest rates more and a continued restrictive monetary policy depending on incoming economic data are also 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 likely to have boosted their performances during the third quarter of 2023.
Overall, the July-September months were marked by strength in product portfolios and solid customer adoption of products. MedTech companies like DexCom, Inc. DXCM, West Pharmaceutical Services, Inc. WST, Merit Medical Systems, Inc. MMSI and Integer Holdings Corporation ITGR 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 Oct 26, 2023.
West Pharmaceutical: West Pharmaceutical’s Proprietary Products segment was an important contributor to its top-line growth in the first half of 2023. The segment is likely to have exhibited sustained strength in the second quarter as well. WST has been witnessing a strong uptake of HVP components, which include Westar, Envision and NovaPure offerings. This trend is likely to have continued in the quarter to be reported. West Pharmaceuticals’ business is exposed to foreign currency exchange rate fluctuations that are likely to have positively impacted the company’s third-quarter performance. However, it expects COVID-related sales to decrease further after declining year over year in the past two quarters. (Read more: What's in Store for West Pharmaceutical in Q3 Earnings?)
West Pharmaceutical Services, Inc. Price and EPS Surprise
West Pharmaceutical Services, Inc. price-eps-surprise | West Pharmaceutical Services, Inc. Quote
The Zacks Consensus Estimate for third-quarter 2023 earnings per share (EPS) is pegged at $1.86. Revenues are expected to be $746.9 million.
West Pharmaceutical 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. WST has an Earnings ESP of -1.23% 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.
DexCom: DexCom’s third-quarter 2023 revenues are likely to have been aided by the continued increase in volume. This surge can be attributed to new patients across all channels and rising global awareness about the benefits of its real-time Continuous Glucose Monitoring system. The company has been benefiting from demographic trends and lifestyles in countries outside Europe and the United States. Per management, international growth remains strong and presents lucrative opportunities, courtesy of improving global access and awareness. (Read more: DexCom to Report Q3 Earnings: Is a Beat in Store?)
DexCom, Inc. Price and EPS Surprise
DexCom, Inc. price-eps-surprise | DexCom, Inc. Quote
The Zacks Consensus Estimate for third-quarter 2023 EPS is pegged at 34 cents. Revenues are expected to be $937.3 million.
DXCM has an Earnings ESP of +7.39% and a Zacks Rank #3.
Merit Medical: Merit Medical’s third-quarter 2023 performance is likely to have been driven by continued strong performance by its Cardiovascular segment. Per management, the segment had exceeded the high end of its expectations for constant currency growth in second-quarter 2023. MMSI’s Peripheral Intervention and Original Equipment Manufacturer products are likely to have continued to witness robust customer adoption, thereby driving up its quarterly revenues in the to-be-reported quarter.
In June, Merit Medical completed the acquisition of a portfolio of dialysis catheter products and the BioSentry Biopsy Tract Sealant System from AngioDynamics. This follows its acquisition of the Surfacer Inside-Out Access Catheter System from Bluegrass Vascular Technologies, Inc. Management believes that these acquisitions will likely strengthen its position in the dialysis and biopsy markets besides expanding its growing specialty dialysis device offering. This also looks promising for the stock.
Merit Medical Systems, Inc. Price and EPS Surprise
Merit Medical Systems, Inc. price-eps-surprise | Merit Medical Systems, Inc. Quote
The Zacks Consensus Estimate for third-quarter 2023 EPS is pegged at 65 cents. Revenues are expected to be $306.3 million.
MMSI has an Earnings ESP of 0.00% and a Zacks Rank #3.
Integer Holdings: Integer Holdings’ second-quarter 2023 results were boosted by robust customer demand across all product lines. ITGR’s robust pipeline of new products and faster-growing end markets raise our optimism about its third-quarter results. Management was encouraged by the significant supply-chain improvement in the last reported quarter. However, management continues to experience pockets of supply chain risk, raising our apprehension.
Integer Holdings Corporation Price and EPS Surprise
Integer Holdings Corporation price-eps-surprise | Integer Holdings Corporation Quote
The Zacks Consensus Estimate for third-quarter 2023 EPS is pegged at $1.05. Revenues are expected to be $372.3 million.
ITGR has an Earnings ESP of -1.91% and a Zacks Rank #3.
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