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Medical Device Stocks' Earnings on Feb 1: BSX, TMO & More

The fourth-quarter earnings season for the Medical sector kicked off last week. Per the latest Earnings Preview, quarterly results have been dull year over year, reflecting the ongoing macroeconomic headwinds and record level of inflationary pressure worldwide. Going by the sector’s scorecard, 8.9% of the companies in the Medical sector, constituting 28.4% of the sector’s market capitalization, reported earnings till Jan 25. Of these, 80% beat earnings estimates and 20% beat the same for revenues. Earnings increased 5% year over year on 7% higher revenues.

Overall, fourth-quarter earnings of the Medical sector are expected to plunge 10.9% on a 2.9% revenue decrease. This compares with the third-quarter reported earnings decline of 3.3% on revenue growth of 5.1%.

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 have witnessed mounting raw material costs and other expense pressure through the Q4 months. Added to this, labor-supply constraints with rising labor costs and global supply-chain hazards are expected to have moderated the growth process.

Medical Device Quarterly Synopsys

Integral to the broader Medical sector, medical device or the Zacks-defined Medical Products companies’ collective business growth is likely to have displayed improvement compared with the last year, with a significant reduction in COVID-led severity across the United States and other developed countries. Through the Q4 months, new waves of coronavirus spread rapidly across various developed and emerging nations. Yet, 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.

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Also, diagnostic testing companies might have shown a sequential rise in testing demand, thanks to rising new cases in select geographies, leading to business growth for many companies.

Overall, the legacy base business recovery and testing demand of the companies through the months of the fourth quarter are expected to have been impressive. Medical device companies like Boston Scientific BSX, Thermo Fisher Scientific TMO, Hologic HOLX and Align Technology ALGN are likely to have been positively influenced by these factors in Q4.

However, as discussed earlier, replicating the market-wide trend, this sector’s Q4 results are likely to be significantly dampened by the ongoing macroeconomic threat in the United States and outside. 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 heavily weighing on the corporate profitability of the 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 Q4 compared to the prior quarter.

Let's take a look at three MedTech players scheduled to announce results on Feb 1.

Boston Scientific: Boston Scientific expects fourth-quarter 2022 operational revenue growth in the range of 8.5% to 10.5% year over year. This excludes an approximate 650-basis point headwind from foreign exchange based on rates during the Q3 earnings release. Meanwhile, BSX’s top line is likely to have improved year over year, with non-COVID elective medical procedures running in a full-fledged way in the United States and elsewhere across the globe. Given the improving scenario along with an innovative pipeline, expansion into faster growth markets, globalization efforts and enhanced digital capabilities, Boston Scientific is well-positioned to register decent fourth-quarter 2022 results.

(Read more: Will Boston Scientific Beat Q4 Earnings Estimates?)

The Zacks Consensus Estimate for total revenues of $3.24 billion for the fourth quarter suggests a 3.6% rise from the prior-year quarter’s reported figure. The consensus mark for BSX’s earnings of 47 cents per share indicates a 4.4% 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 exactly the case as you can see below.

BSX has an Earnings ESP of +2.64% and carries a Zacks Rank #3. 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 and EPS Surprise
Boston Scientific Corporation Price and EPS Surprise

Boston Scientific Corporation price-eps-surprise | Boston Scientific Corporation Quote

Thermo Fisher: Through the months of the fourth quarter, Thermo Fisher’s Analytical Instruments segment is expected to have generated strong sales, banking on electron microscopy, chromatography, mass spectrometry, chemical analysis as well as research and safety market channel businesses. The company is expected to have recorded growth, driven by a favorable business mix and new launches. The company advanced its Orbitrap portfolio, launching the Orbitrap Ascend Tribrid mass spectrometer. In electron microscopy, the company introduced the Thermo Scientific Arctis Cryo-Plasma Focused Ion Beam, an automated microscope that streamlines cryoelectron tomography. These are all expected to have contributed to the Q4 top line of Thermo Fisher.

(Read more: What's in Store for Thermo Fisher in Q4 Earnings?)

The Zacks Consensus Estimate for Thermo Fisher’s fourth-quarter revenues is pegged at $10.36 billion, which implies a decline of 3.2% from the year-ago figure. The consensus estimate for earnings per share is pegged at $5.19, suggesting a fall of 20.6% from the prior-year reported figure.

TMO has an Earnings ESP of -0.62% and a Zacks Rank #3.

Thermo Fisher Scientific Inc. Price and EPS Surprise

Thermo Fisher Scientific Inc. Price and EPS Surprise
Thermo Fisher Scientific Inc. Price and EPS Surprise

Thermo Fisher Scientific Inc. price-eps-surprise | Thermo Fisher Scientific Inc. Quote

Hologic: In the first quarter of fiscal 2023, Hologic is expected to have witnessed strong growth in the Diagnostics business (excluding COVID) from the growing adoption of Panther instruments and an expanded Panther installed base. During the fourth-quarter earnings update, Hologic noted that the company has nearly 3,250 Panthers instruments placed globally. Its performance might have been driven by both legacy and new assays, namely the BBCVTV vaginitis panel, MGen, CTMG and its respiratory menu on the Panther Fusion. However, with COVID testing significantly down over the past few months, Hologic’s Molecular Diagnostics business is likely to have been impacted by lower COVID-related sales.

(Read more: Hologic to Report Q1 Earnings: What's in the Cards?)

The Zacks Consensus Estimate for Hologic’s fiscal first-quarter revenues is pegged at $980.9 million, which implies a decline of 33.3% from the year-ago figure. The consensus estimate for earnings per share is pegged at 96 cents, suggesting a fall of 55.8% from the prior-year reported figure.

HOLX has an Earnings ESP of +5.05% and a Zacks Rank #2.

Hologic, Inc. Price and EPS Surprise

Hologic, Inc. Price and EPS Surprise
Hologic, Inc. Price and EPS Surprise

Hologic, Inc. price-eps-surprise | Hologic, Inc. Quote

Align Technology: Align Technology is likely to have gained from increasing clear aligners shipments to Invisalign doctors worldwide. In the last reported quarter, the company witnessed increased shipments in Invisalign case volumes across almost all markets — led by Taiwan, Thailand, India and Korea — driven by increased submitters.  Analysts expect this trend to have continued in the to-be-reported quarter, aiding sales growth. However, the ongoing conflict in Ukraine and the heightened volatility in foreign exchange rates might have posed hindrances to recovery, hampering business performance in Q4. Staffing shortages and the ongoing inflationary pressure are expected to have dragged the company’s profitability down in Q4.(Read more: Align Technology to Post Q4 Earnings: What's in Store?)

The Zacks Consensus Estimate for fourth-quarter earnings of $1.52 per share implies a 46.3% plunge from the year-ago reported figure. The consensus estimate for revenues is pegged at $889.9 million, suggesting a 13.7% fall from the prior-year reported number.

ALGN has an Earnings ESP of +2.56% and a Zacks Rank #4 (Sell).

Align Technology, Inc. Price and EPS Surprise

Align Technology, Inc. Price and EPS Surprise
Align Technology, Inc. Price and EPS Surprise

Align Technology, Inc. price-eps-surprise | Align Technology, Inc. Quote

 

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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