Yahoo Finance Watch These 3 MedTech Stocks This Earnings Season: Beat or Miss?
The earnings season is in full swing now with several MedTech bigwigs already releasing first-quarter results. Per the latest Earnings Preview, quarterly results of the Medical sector have declined year over year, affected by the ongoing macroeconomic headwinds, primarily in the form of worldwide geopolitical issues and healthcare labor shortages.
Going by the broader Medical sector’s scorecard, 5% of the companies in the Medical sector, constituting 19.4% of the sector’s market capitalization, reported earnings till Apr 17. Earnings declined 0.3% year over year on 3.7% higher revenues. However, 100% of these companies beat earnings and 66.7% beat revenue estimates, which were already down because of the ongoing macroeconomic issues.
Overall, first-quarter earnings of the Medical sector are expected to decline 5.6% despite 6.1% revenue growth. This compares with the fourth-quarter earnings decline of 17.1% on revenue growth of 7%.
Some major industry players like Laboratory Corporation of America Holdings or Labcorp LH, Edwards Lifesciences EW and ResMed RMD are set to report results tomorrow.
Factors Likely to Influence MedTech Stocks’ Results
Replicating the broader market trend, MedTech or the Zacks-defined Medical Products companies’ collective business growth in the first quarter is likely to have stabilized. With the pandemic-related crisis gone, the industry is experiencing rapid adoption of generative Artificial Intelligence (genAI) and digital therapies, which market observers predict will take the healthcare business by storm.
Macro trends that are setting the stage for even more innovation and investment in this space are an aging population, growing healthcare awareness and increasing access to better health options. Favorable impacts from these are expected to be seen in the first-quarter results.
Yet, the industry is once again in a difficult position due to the worsening geopolitical environment, supply chain bottlenecks that result in high costs for labor and raw materials, as well as freight and a shortage of healthcare workers.
Also, diagnostic testing companies have been witnessing a severe year-over-year decline in testing demand, compared to strong demand in the year-ago period for COVID-19 testing products.
MedTech Stocks to Watch
LabCorp: In the to-be-reported quarter, LabCorp is likely to have continued benefiting from its health systems and regional local lab partnership strategy. The company recently entered into an agreement to acquire BioReference Health's laboratory testing businesses, which focus on clinical diagnostics and reproductive and women's health across the United States, outside of New York and New Jersey.
On the flip side, over the last several quarters, the downturn in COVID-19 testing revenues has continued to impact Labcorp’s overall revenue growth and other important metrics. This trend is likely to have persisted in the first quarter of 2024 as well.
(Read more: Labcorp to Report Q1 Earnings: What's in the Cards?)
The Zacks Consensus Estimate for first-quarter total revenues is pegged at $3.13 billion.
The consensus mark for adjusted earnings stands at $3.46 per share.
During the first quarter, the company’s shares declined 3.8% against the industry’s 7.7% growth.
Per our proven model, a stock with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates. This is exactly the case, as you can see below.
LabCorp has an Earnings ESP of +1.07% and carries a Zacks Rank of 2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Labcorp Price and EPS Surprise
Labcorp price-eps-surprise | Labcorp Quote
Edwards Lifesciences: Similar to the last reported quarter, Edwards Lifesciences is likely to have gained from its patient-focused innovation strategy. The strong adoption of transcatheter heart valves is expected to have driven growth in the first quarter, aided by consistent performance of the Critical Care arm and Transcatheter Heart Valves. Within the Transcatheter Aortic Valve Replacement (TAVR) arm, Edwards Lifesciences is likely to have witnessed continued growth in procedures across the United States and worldwide. The continued strong demand for the company’s SAPIEN platform is expected to have acted as the primary growth factor.
However, we note that staffing shortages, which reduced hospital capacity, and choppy market conditions due to a difficult geopolitical situation are concerns. These are likely to have impeded the company’s growth in the quarter to be reported.
The Zacks Consensus Estimate for first-quarter total revenues is pegged at $1.58 billion, suggesting a 7.9% rise from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at 64 cents per share, indicating a 3.2% rise from the year-ago quarter’s reported figure.
During the first quarter, the stock increased 25.3% compared with the industry’s 9.3% growth.
EW has an Earnings ESP of +1.02% and carries Zacks Rank #3.
(Read more: Is a Beat Likely for Edwards Lifesciences in Q1 Earnings?)
Edwards Lifesciences Corporation Price and EPS Surprise
Edwards Lifesciences Corporation price-eps-surprise | Edwards Lifesciences Corporation Quote
ResMed: The company is expected to have witnessed strong demand for its market-leading mask portfolio in fiscal third-quarter 2024 despite being faced with challenges related to lower new patient setups from a competitor recall. Continued product development is expected to have driven growth within this business globally. The company successfully introduced a full suite of masks in its AirFit and, AirTouch and other ranges. Further, to promote greater patient adherence, ResMed offers advanced and expanded integrations of its therapy-based software solutions, including AirView. These are expected to have contributed to the top line in the to-be-reported quarter. Added to this, Device sales are expected to have continued to drive overall revenue growth, reflecting the ongoing combined availability of AirSense 10 and AirSense 11 sleep devices to support strong underlying global demand.
The Zacks Consensus Estimate for the company’s third-quarter fiscal 2024 total revenues is pegged at $1.18 billion, suggesting a 5.5% rise from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at $1.92 per share, indicating a 14.3% rise from the year-ago quarter’s reported figure.
Meanwhile, during the fiscal third quarter (ending Mar 31), shares of the company rallied 15.1% compared to the industry’s 7.1% growth.
ResMed has an Earnings ESP of -2.35% and carries a Zacks Rank #2.
ResMed Inc. Price and EPS Surprise
ResMed Inc. price-eps-surprise | ResMed Inc. Quote
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