Yahoo Finance What's in Store for These 5 Medical Device Stocks in Q1 Earnings?
With the first-quarter earnings season in full swing, it's going to be a pivotal week for numerous firms within the medical device sector. The latest Earnings Trends report indicates modest revenue growth within the Medical sector. While earnings have been nearly flat, they have consistently outperformed market forecasts. The top-line improvement can be attributed to sustained demand for medical products and services, as well as favorable pricing strategies. However, the bottom-line narrative is somewhat tempered by the burden of increased costs and interest expenses, which have dampened earnings growth, causing it to trail behind the robust sales figures.
Going by the broader Medical sector’s scorecard, 16.7% of the companies in the Medical sector, constituting 32.6% of the sector’s market capitalization, reported earnings till Apr 24. The bottom line rose 0.7% year over year on 3.6% higher revenues. However, 100% of these companies beat on earnings and 70% beat on revenues.
Overall, first-quarter earnings of the Medical sector are expected to have declined 7.6% despite 6.3% growth in revenues. This compares with the fourth-quarter earnings decline of 17.1% on revenue growth of 7%.
Some major industry players like Becton, Dickinson and Company BDX, popularly known as BD, Baxter BAX, DENTSPLY SIRONA XRAY, Cardinal Health CAH and DaVita DVA are set to report their quarterly results tomorrow.
Potential Factors Driving Q1 Medical Earnings Season
Increased consumer expenditure and a backlog in patient diagnosis and treatments, accumulated over recent years due to the COVID-19 pandemic, are believed to be the primary drivers behind the heightened demand for the medical device industry's offerings. Concurrently, the adoption of artificial intelligence (AI) across a range of medical products has likely bolstered sales growth, thanks to improved outcomes. AI's role in identifying previously complex or undiagnosable conditions has been particularly noteworthy.
On the flip side, persistent macroeconomic challenges must have posed significant obstacles for medical device firms. Global supply-chain disruptions persist, escalating labor and raw material costs and freight charges, coupled with the healthcare worker shortage.
Additionally, the slower-than-projected growth of U.S. businesses, coupled with inflation rates surpassing expectations, might have contributed to delays in the reduction of interest rates. Such elevated interest rates are likely to have squeezed net margins. High capital investments by numerous medical device companies, aimed at fostering the adoption of cutting-edge technologies, are likely to have resulted in increased interest expenses in the first quarter.
Moreover, companies specializing in diagnostic testing must have continued to face a stark year-over-year decline in testing demand. This poses a stark contrast to the robust demand experienced during the prior-year quarter for COVID-19 testing kits.
Medical Device Stocks to Watch
BD: Solid growth in the Life Sciences segment in China, strength in Microbiology platforms and Research Instruments, and strong growth from Molecular In Vitro Diagnostic assays are likely to have driven the Life Sciences segment’s revenues during the soon-to-be-reported quarter. The segment is likely to have witnessed continued adoption of the products in second-quarter fiscal 2024, thereby significantly driving up the segmental revenues.
During the fiscal first quarter, the Interventional segment continued to witness strong growth, driven by continued market adoption of the segment’s products. On the fiscal first-quarter earnings call, management confirmed that the performance in BD’s oncology business was driven by growth in biopsy, including strong market acceptance of its recently launched BD Trek, powered bone biopsy system. These trends are likely to have continued in the second quarter, thereby significantly bolstering the segmental revenues.
(Read more: Sustained Product Demand Likely to Aid BD's Q2 Earnings)
The Zacks Consensus Estimate for revenues is pegged at $5.03 billion. The consensus mark for adjusted earnings is pinned at $2.96 per share.
During the quarter, the company’s shares rose 18.3% compared with the industry’s 7.1% 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 on earnings. However, this is not the case here, as you can see below.
BD has an Earnings ESP of 0.00% and a Zacks Rank of 2 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Becton, Dickinson and Company Price and EPS Surprise
Becton, Dickinson and Company price-eps-surprise | Becton, Dickinson and Company Quote
Baxter: Strong execution across commercial and manufacturing teams, coupled with new product launches and a more stable supply chain, is likely to have aided first-quarter sales for the Medical Products and Therapies segment. Continued growth in the U.S. injectables portfolio on the back of new launches, as well as continued strong demand for services within the drug-compounding portfolio internationally, are likely to have been the key drivers for the Pharmaceutical segment.
Meanwhile, ongoing transformation initiatives are expected to have enhanced operational efficiencies, which might have led to lower expenses during the quarter.
The Zacks Consensus Estimate for first-quarter revenues is pegged at $3.55 billion, implying a 2.7% decline from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at 61 cents per share, indicating a 3.4% increase from the year-ago quarter’s reported actuals.
During the first quarter, the stock rose 18.6% compared with the industry’s 8.9% growth.
BAX has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.
(Read more: Baxter to Report Q1 Earnings: What's in the Cards?)
Baxter International Inc. Price and EPS Surprise
Baxter International Inc. price-eps-surprise | Baxter International Inc. Quote
DENTSPLY SIRONA: Continued market share gains and new product offerings are likely to have been the key factors for the Orthodontic and Implant Solutions segment in the first quarter. Improved customer conversion rates and lower customer acquisition costs are likely to have benefited aligners sales.
For the first quarter, the company expects organic sales to be roughly flat year over year, with slightly lower reported sales due to a negative impact of foreign currency movement. However, on a sequential basis, the gross margin is expected to have improved.
The Zacks Consensus Estimate for the company’s first-quarter total revenues is pegged at $969.8 million, indicating a 0.8% decline from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at 42 cents per share, indicating a 7.7% increase from the year-ago quarter’s reported actuals.
Meanwhile, during the first quarter, shares of the company lost 12.8% against the industry’s 8.8% growth.
DENTSPLY SIRONA has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.
(Read more: What's in Store for DENTSPLY SIRONA in Q1 Earnings?)
DENTSPLY SIRONA Inc. Price and EPS Surprise
DENTSPLY SIRONA Inc. price-eps-surprise | DENTSPLY SIRONA Inc. Quote
Cardinal Health: The second quarter of fiscal 2024 witnessed an uptick in revenues from the Pharmaceutical segment. The top line amounted to approximately $54 billion, up 12% on a year-over-year basis. The Pharmaceutical Distribution and Specialty Solutions segment saw a rise in the sales of branded pharmaceuticals during the second quarter, which was reflected in the performance. The segment's profit increased 11.6% during the period. This momentum is likely to have continued in the fiscal third quarter. Moreover, the rising demand for GLP-1 medications is likely to have acted as a tailwind.
The Zacks Consensus Estimate for the company’s third-quarter fiscal 2024 revenues is pegged at $55.82 billion, implying a 10.6% improvement from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at $1.95 per share, 12.1% higher than the year-ago quarter’s reported numbers.
Meanwhile, during the third quarter of fiscal 2024, shares of the company lost 19.3% against the industry’s 6.6% growth.
Cardinal Health has an Earnings ESP of +1.11% and a Zacks Rank #3 at present.
(Read more: What's in Store for Cardinal Health in Q3 Earnings?)
Cardinal Health, Inc. Price and EPS Surprise
Cardinal Health, Inc. price-eps-surprise | Cardinal Health, Inc. Quote
DaVita: Per management, after years of investment and consistent year-over-year improvements in cost savings, DaVita’s Medicare Advantage contracts and Special Need Plans have now reached profitability. These developments significantly raise our optimism about the stock, as we expect this momentum to have continued in the first quarter and driven up its overall revenues. DaVita’s savings are likely to have offset any increase in adjusted patient care cost per treatment. This includes leveraging fixed costs on an increase in treatment volume and annualization of cost-saving initiatives in 2023. It also includes conversion to MIRCERA for anemia management and center consolidation efforts. These initiatives are likely to have continued in the to-be-reported quarter, thereby benefiting the company.
Although the company has been reducing its reliance on contract labor, it is still likely to have weighed on DaVita’s performance in the to-be-reported quarter. Management continues to expect wages to increase at rates above pre-COVID levels. This also raises our apprehension.
The Zacks Consensus Estimate for the company’s first-quarter total revenues is pegged at $3.01 billion, implying a 4.8% improvement from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at $1.96 per share, 24.1% higher than the year-ago quarter’s reported numbers.
Meanwhile, during the first quarter, shares of the company lost 19.3% against the industry’s 6.6% growth.
DaVita has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.
DaVita Inc. Price and EPS Surprise
DaVita Inc. price-eps-surprise | DaVita Inc. Quote
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DENTSPLY SIRONA Inc. (XRAY) : Free Stock Analysis Report
