The first-quarter earnings season for the Medical sector kicked off last week. Per the latest Earnings Preview, quarterly results so far have been dull year over year, reflecting the ongoing macroeconomic headwinds and record level of inflationary pressure worldwide. Going by the sector’s scorecard, 8.8% of the companies in the Medical sector, constituting 27.5% of the sector’s market capitalization, reported earnings till Apr 19. Of these, 100% beat both earnings and revenue estimates. Earnings declined 2.4% year over year on 9.8% higher revenues.
Overall, first-quarter earnings of the Medical sector are expected to plunge 22.4% on a 1% revenue growth. This compares with the fourth-quarter earnings decline of 6.7% on revenue growth of 4.9%.
The projection reflects the ongoing global inflationary pressure leading to an extremely tough situation related to raw material and labor cost as well as freight charges, which have put the industry in a tight spot again. The majority of the players within this space witnessed a rise in raw material costs and other expense pressure through the first-quarter months. Added to this, labor-supply constraints due to an increase in labor costs and global supply-chain hazards are expected to have moderated the growth process.
MedTech Quarterly Synopsys
Integral to the broader Medical sector, MedTech or the Zacks-defined Medical Products companies’ collective business growth is likely to have displayed a declining trend compared with the sequentially last reported quarter.
Replicating the market-wide trend, this sector’s first-quarter results are likely to be significantly dampened by the ongoing macroeconomic threat in the United States and outside. Through the first-quarter months, the companies, which are into international trade, are expected to have faced severe currency headwind. During this period, the U.S. dollar strengthened compared to several foreign currencies, which is expected to have resulted in a slightly more unfavorable impact on sales compared to exchange rates at the time of the fourth-quarter earnings season.
Further, despite the reopening of the economy, the vicious cycle of deteriorating inflationary situation along with aggressive rate hikes has put the global investment scenario in a tighter spot again. Within medical device, going by the industry-wide trend so far, logistical challenges and increasing unit costs have been weighing heavily on the corporate profitability of stocks across the board. On the other hand, the tightened monetary policy is starkly altering consumer preferences and once again, demand for the non-essential category line of medical device businesses is on the back foot. This might have, in a way, shrunk the companies’ revenues in the first quarter compared to the prior quarter.
Also, diagnostic testing companies might have shown a severe year-over-year decline in testing demand, compared to a very strong comparison in the year-ago period on rising new cases in select geographies, which led to business growth for many companies.
Medical device companies like Boston Scientific BSX, Thermo Fisher Scientific TMO, Edwards Lifesciences EW and Align Technology ALGN are likely to have been influenced by these abovementioned factors in the first quarter.
On a positive note, the companies’ successful addressing of a couple of years’ pent-up demand is likely to have led to higher year-over-year growth within the legacy base businesses of the industry players. The legacy base business recovery and testing demand of the companies through the months of the first quarter are expected to have been impressive.
Let's take a look at four MedTech players scheduled to announce results on Apr 25.
Boston Scientific’s top line is likely to have improved year over year, with elective medical procedures running in a full-fledged way in the United States and elsewhere across the globe. Given the improved scenario along with an innovative pipeline, expansion into faster growth markets, globalization efforts and enhanced digital capabilities, BSX is well-positioned to register decent first-quarter 2023 results.
(Read more: What's in Store for Boston Scientific in Q1 Earnings?)
The Zacks Consensus Estimate for total revenues of $3.15 billion for the first quarter suggests a 4.1% rise from the prior-year quarter’s reported figure. The consensus mark for BSX’s earnings of 43 cents per share indicates a 10.3% rise from the year-ago quarter’s reported figure.
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 not the case as you can see below.
BSX has an Earnings ESP of 0.00% and carries a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Boston Scientific Corporation Price and EPS Surprise
Boston Scientific Corporation price-eps-surprise | Boston Scientific Corporation Quote
Thermo Fisher’s Analytical Instruments segment is expected to have generated strong sales, banking on electron microscopy, chromatography, mass spectrometry, chemical analysis and research and safety market channel businesses. The company is expected to have recorded growth, driven by a favorable business mix and new launches. TMO launched the Gibco CTS DynaCellect Magnetic Separation System aiding customers to advance their cell and gene therapy programs. These are all expected to have contributed to the first-quarter top line.
(Read more: What's in Store for Thermo Fisher in Q1 Earnings?)
The Zacks Consensus Estimate for Thermo Fisher’s first-quarter revenues is pegged at $10.57 billion, which implies a decline of 10.6% from the year-ago figure. The consensus estimate for earnings per share is pegged at $4.95, suggesting a fall of 31.7% from the prior-year reported figure.
TMO has an Earnings ESP of +2.02% and a Zacks Rank #3.
Thermo Fisher Scientific Inc. Price and EPS Surprise
Thermo Fisher Scientific Inc. price-eps-surprise | Thermo Fisher Scientific Inc. Quote
Edwards Lifesciences is likely to have gained from the continued demand for its state-of-the-art HemoSphere monitoring platform and Smart Recovery. The increase in hospital visits with the improving market scenario is likely to have benefited HemoSphere sales, thus adding to the top line. In the prior quarter, the company’s portfolio of Smart Recovery sensors, including FloTrac and ClearSight sensors with its unique hypotension prediction index algorithm, witnessed increased adoption by supporting more patients in the intensive care unit. The company also witnessed strong demand for pressure monitoring devices used in the ICU due to elevated hospitalizations in the United States. We expect this trend to have continued in the first quarter, benefiting the segment’s performance.
(Read more: What's in Store for Edwards Lifesciences in Q1 Earnings?)
The Zacks Consensus Estimate for Edwards Lifesciences’ first-quarter revenues is pegged at $1.39 billion, which implies a 3.9% improvement from the year-ago figure. The consensus estimate for earnings per share is pegged at 61 cents, suggesting a 1.7% improvement from the prior-year reported figure.
EW has an Earnings ESP of 0.00% and a Zacks Rank #2.
Edwards Lifesciences Corporation Price and EPS Surprise
Edwards Lifesciences Corporation price-eps-surprise | Edwards Lifesciences Corporation Quote
Align Technology’s teen segment has strong potential, with an increase in the number of doctors submitting teen cases in the past few months. Invisalign First for kids has been gaining market share rapidly across all regions. In the last reported quarter, the EMEA region, in particular, saw strong sequential growth in the teen market segment, with solid demand for Invisalign Teen case packs. The growing uptake is likely to have sustained, benefiting the company’s top line in the first quarter. (Read more: Align Technology to Post Q1 Earnings: What's in Store?)
The Zacks Consensus Estimate for first-quarter earnings of $1.69 per share implies a 22.7% plunge from the year-ago reported figure. The consensus estimate for revenues is pegged at $908.3 million, suggesting a 67% fall from the prior-year reported number.
ALGN has an Earnings ESP of +3.08% and a Zacks Rank #3.
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Align Technology, Inc. Price and EPS Surprise
Align Technology, Inc. price-eps-surprise | Align Technology, Inc. Quote
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