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The Zacks Analyst Blog Highlights BioRad Laboratories, Henry Schein, Insulet, Abbott and LabCorp

For Immediate Release

Chicago, IL – April 27, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: BioRad Laboratories BIO, Henry Schein HSIC, Insulet PODD, Abbott ABT and LabCorp LH.

Here are highlights from Wednesday’s Analyst Blog:

3 MedTech Stocks Likely to Beat Q1 Earnings Estimates

So far, the first-quarter reporting cycle has displayed a year-over-year earnings deterioration for MedTech companies within the broader Medical sector. The handful of MedTech stocks that have released their earnings so far showed market share gain within their base businesses through the months of the first quarter compared with 2022. However, the ongoing macroeconomic headwind in the form of a record level of inflation put pressure on the bottom line.

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Even if we consider the performance on a sequential basis, the first-quarter performance of the majority of the companies is likely to have declined. 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.

Here we talk about three stocks, BioRad Laboratories, Henry Schein and Insulet that are expected to beat earnings estimates in the ongoing reporting cycle.

Two Major Q1 Trends

The first-quarter reporting cycle is expected to depict a year-over-year improvement in base sales volumes. This can be attributed to a significant reduction in COVID-led severity globally. There has been a significant rebound in non-COVID and elective legacy businesses of the MedTech companies. Meanwhile, the first-quarter results of the diagnostic testing companies are expected to reflect a year-over-year decline in testing demand.

However, a contrasting trend is also evident. Considering the deteriorating trade situation, with global inflationary pressure leading to an extremely tighter situation related to raw material and labor cost as well as freight charges, we expect first-quarter results to be disappointing in comparison to the year-ago period.

Through the first-quarter months, the companies, which are into international trade, are expected to have faced severe currency headwinds. During this period, the U.S. dollar strengthened compared to several foreign currencies, resulting in a slightly more unfavorable impact on sales compared to exchange rates at the time of the fourth-quarter earnings season.

In this regard, IMF, in April provided its World Economic Outlook Update. Going by the outlook, the baseline forecast is for growth to decelerate from 3.4% in 2022 to 2.8% in 2023, before settling at 3% in 2024. IMF expects developed economies to see an especially pronounced growth slowdown, from 2.7% in 2022 to 1.3% in 2023. This is expected to get reflected in the Q1 results of the MedTech companies in the form of logistical challenges and increasing unit cost in the first quarter, resulting in corporate profitability cuts.

Q1 Scorecard Thus Far

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 1% revenue growth. This compares with the fourth-quarter earnings decline of 6.7% on revenue growth of 4.9%.

Abbott is one of the few companies whose base-business performance registered a strong recovery rate.

In the first quarter, Abbott’s Established Pharmaceuticals sales increased 11.1% on an organic basis on sales improvement in countries like Brazil, China and Southeast Asia and across several therapeutic areas, including cardiometabolic, respiratory and central nervous system/pain management. Diabetes Care reported organic growth of 21% year over year, led by FreeStyle Libre, which contributed $1.2 billion in revenues in the reported quarter.

However, rising costs and expenses in the face of record inflationary pressure put huge pressure on margins for the company.Adjusted operating margin contracted 827 bps to 20.5% in Q1.

LabCorp’s revenues in the first quarter fell 3.1% year over year. The decline in revenues can be attributed to a 3.6% fall in organic revenues and a 0.7% negative impact from foreign currency translation. The downside was partially offset by 1.2% growth from acquisitions net of divestitures. The drop in organic revenues was due to an 11.6% fall in contribution from COVID-19 PCR and antibody testing (COVID-19 testing).

LabCorp’s gross margin contracted 582 basis points (bps) to 25.8% in the first quarter. Adjusted operating margin contracted 857 bps from the year-ago quarter to 11.1%.

Zacks Methodology

Given the high degree of diversity in the Medtech industry, finding the right stocks with the potential to beat estimates might be quite a daunting task.

However, our proprietary Zacks methodology makes this fairly simple.

We are focusing on stocks that have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with this combination, the chances of an earnings surprise are as high as 70%.

Earnings ESP provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Here we present three MedTech stocks that are expected to beat earnings estimates in this reporting cycle.

BioRad’s Life Science segment has been registering robust revenues over the past few quarters, driven by sustained sales in Droplet Digital PCR and qPCR products, process chromatography and western blotting. In the last reported quarter, BIO delivered solid organic revenues from this segment, partly contributed by the reduction of back-orders. We expect this growth momentum to have continued in the first quarter of 2023. (BioRad Laboratories to Post Q1 Earnings: What's in Store?)

BioRad’s Earnings ESP of +0.16% and a Zacks Rank #2 raise the possibility of an earnings surprise in the to-be-reported quarter.

BioRad is slated to release results for the first quarter of fiscal 2023 on May 4.

Bio-Rad Laboratories, Inc. price-eps-surprise | Bio-Rad Laboratories, Inc. Quote

Henry Schein’s Dental business is likely to have gained from the acquisition of Midway Dental in the United States and Condor Dental in Switzerland in the first quarter. The company also acquired a majority stake in Unitas and completed the acquisition of a majority ownership stake in Biotech Dental S.A.S. These newly-added businesses are expected to have strengthened the company’s longstanding presence in the United States and worldwide, providing dental customers with an expanded portfolio of solutions. (Read more: Henry Schein to Report Q1 Earnings: What's in Store?)

Henry Schein is expected to release first-quarter 2023 results shortly.

Henry Schein has an Earnings ESP of +0.99% and a Zacks Rank #2.

Henry Schein, Inc. price-eps-surprise | Henry Schein, Inc. Quote

Insulet’s Q1 performance is expected to have benefited from the continued uptake of Omnipod through the U.S. pharmacy channel and strong U.S. and Total Omnipod new customer starts. This is expected to have been driven mainly by a strong start to the full market release of the Omnipod 5 automated insulin delivery system in the United States.

Insulet is scheduled to release first-quarter 2023 results on May 4.

Insulet has an Earnings ESP of +70.21% and a Zacks Rank #1.

Insulet Corporation price-eps-surprise | Insulet Corporation Quote

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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