Medical Device Stocks' Q3 Earnings on Oct 27: LH, BIO & More

This earnings season so far has reflected a strong revenue momentum for companies within the Medical sector. Earnings have also increased year over year, albeit, at a slower pace than revenues. Inflationary headwinds, supply chain challenges and labor shortages however continued for the sector, hurting the bottom line amid recovering demand for medical products and services. Per the latest Earnings Preview, 8.9% of the companies in the Medical sector, comprising 29.8% of the sector’s market capitalization, reported earnings till Oct 19. Of these, 80% beat earnings estimates while all of them surpassed revenue estimates. Earnings increased 3.8% year over year on 8.9% higher revenues.

This scorecard highlights the Medical sector’s continued resilience amid an uncertain macroeconomic environment. Throughout the third quarter, most players in the industry were reeling under the greater-than-anticipated surge in inflationary pressure across the world. Mounting raw material costs, labor-supply constraints and supply-chain disruptions hampered the entire production and distribution process. Despite the challenging situation, the consistent opening up of economies, with countries lifting COVID-19 restrictions, might have favored the growth process in Q3.

Overall, third-quarter earnings of the Medical sector are expected to decline 7.6%, while sales are expected to increase 3.8%. This compares with the second-quarter reported earnings growth of 6.5% and revenue growth of 9.9%.

Medical Device Quarterly Synopsys

Integral to the broader Medical sector, the Medical Device companies’ collective business growth is likely to have recorded an improvement compared with the last year, with a significant reduction in COVID-led fatality across the United States and other developed countries. Added to this, notable Medical Device players have been undertaking consistent efforts to mitigate staffing shortages that have disrupted business growth since the pandemic’s beginning. These factors are likely to have been advantageous for the base businesses of the Medical Device stocks.

Yet, Medical Device companies continue to be burdened by the global shortage of semiconductors chips that produce life-saving medical equipment like pacemakers, blood-pressure monitors, insulin pumps and defibrillators. This ongoing challenge is expected to have significantly hampered performance across several businesses in the Medical Device industry in Q3.

Overall, the rebound in the base business through the months of the third quarter is expected to have been impressive. Medical Device companies like Laboratory Corporation of America Holdings LH or LabCorp, Bio-Rad Laboratories, Inc. BIO, Baxter International BAX, DexCom DXCM and West Pharmaceutical Services WST are likely to have been positively influenced by the abovementioned factors in Q3, despite continuing challenges in the macroeconomic front.

Let’s take a look at the Medical Device players scheduled to announce results on Oct 27.

LabCorp: LabCorp has been registering an ongoing sales rebound in the base business for both Diagnostics and Drug Development segments. However, as the severity of the pandemic has declined, we expect the demand for COVID-19 testing services and vaccines to have been lower than the year-ago period, impacting the third-quarter sales performance. Added to this, the ongoing inflationary pressure, a strengthening U.S. dollar and supply chain issues are expected to have adversely impacted LabCorp’s third-quarter performance (Read more: LabCorp to Report Q3 Earnings: What's in the Cards?)

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.

LH has an Earnings ESP of -1.41% 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.

Laboratory Corporation of America Holdings Price and Consensus

Laboratory Corporation of America Holdings Price and Consensus

Laboratory Corporation of America Holdings price-consensus-chart | Laboratory Corporation of America Holdings Quote

Bio-Rad: Bio-Rad’s Life Science segment has been registering robust revenue growth over the past few quarters. We expect this growth momentum to have continued in the third quarter on the back of sustained sales gains in the company’s Polymerase Chain Reaction (PCR), Droplet Digital PCR (dPCR), Process Media businesses and Western Blot. The company has also been witnessing strong growth in the biopharma market for the Droplet Digital PCR platform, which is expected to have made significant contributions to the third-quarter top line. However, due to the Russia-Ukraine war situation, supply chain constraints are likely to have impacted instrument placements. (Read more: Bio-Rad to Report Q3 Earnings: What's in the Cards?)

BIO has an Earnings ESP of 0.00% and a Zacks Rank #3.

BioRad Laboratories, Inc. Price and Consensus

BioRad Laboratories, Inc. Price and Consensus

BioRad Laboratories, Inc. price-consensus-chart | BioRad Laboratories, Inc. Quote

Baxter International: Increased demand for acute therapies products due to the resurgence of COVID-19 and continuous renal replacement therapies, devices and associated consumables are likely to have driven Baxter’s Acute Therapies business’ third-quarter 2022 performance. The company’s robust product portfolio and the planned launch of therapies and products are expected to have impacted the to-be-reported quarter’s revenues. However, the sales growth of the BioPharma Solutions segment is likely to have been hurt by challenging year-over-year comparisons, resulting from prior-year COVID-related sales. (Read more: Baxter to Report Q3 Earnings: Is a Beat in the Cards?)

Baxter has a Zacks Rank #4 (Sell) and an Earnings ESP of +1.31%.

Baxter International Inc. Price and Consensus

Baxter International Inc. Price and Consensus

Baxter International Inc. price-consensus-chart | Baxter International Inc. Quote

DexCom: DexCom’s third-quarter 2022 top line is likely to have been impacted by an increase in volume, courtesy of new patients across all channels and rising global awareness regarding the benefits of its real-time Continuous Glucose Monitoring (“CGM”).

DexCom launched the Dexcom ONE product in the United Kingdom and Spain during the second quarter. These developments are likely to have benefited customer growth during the soon-to-be-quarter. In March, the company’s received the FDA’s Breakthrough Device Designation for the Dexcom CGM system’s use in the hospital setting. DexCom has been benefiting from demographic trends and lifestyles in countries outside the United States and Europe. Per the company, international growth remains strong and presents lucrative opportunities, courtesy of improving global access and awareness. These developments may have favored the company’s performance in the to-be-reported quarter. (Read more: Is a Beat Likely for DexCom This Earnings Season?)

DexCom has an Earnings ESP of +7.00% and a Zacks Rank #3.

DexCom, Inc. Price and Consensus

DexCom, Inc. Price and Consensus

DexCom, Inc. price-consensus-chart | DexCom, Inc. Quote

West Pharmaceutical Services: West Pharmaceutical’s Proprietary Products business continues to exhibit sustained strength and has been an important contributor to the company’s top-line growth. In the first half of 2022, sales improved significantly on the back of double-digit growth in high-value products (HVP). The trend is likely to have continued in the third quarter. Apart from this, the company is likely to have witnessed margin expansion in the aforementioned segment in the to-be-reported quarter, owing to a favorable mix of products sold (stemming from the demand in HVP), production efficiencies and higher sales price. However, the company’s business is exposed to foreign currency exchange rate fluctuations, which is likely to have adversely impacted the company’s third-quarter performance. (Read more: What's in Store for West Pharmaceutical in Q3 Earnings?)

West Pharmaceutical Services has an Earnings ESP of -1.51% and a Zacks Rank #4.

West Pharmaceutical Services, Inc. Price and Consensus

West Pharmaceutical Services, Inc. Price and Consensus

West Pharmaceutical Services, Inc. price-consensus-chart | West Pharmaceutical Services, Inc. Quote

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Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report
 
Baxter International Inc. (BAX) : Free Stock Analysis Report
 
DexCom, Inc. (DXCM) : Free Stock Analysis Report
 
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West Pharmaceutical Services, Inc. (WST) : Free Stock Analysis Report
 
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