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Medical Device Stocks to Watch for Earnings on Jul 28

Zacks Equity Research
·6-min read

The latest Earnings Preview reflects an impressive second-quarter performance for the Medical sector this reporting cycle. Per the sector’s scorecard, 8.9% of the companies in the Medical sector, comprising 29% of the sector’s market capitalization, reported earnings till Jul 22. Of these, 100% beat both earnings and revenue estimates. Earnings increased 10.4% year over year on 11.2% higher revenues.

This scorecard highlights the Medical sector’s continued resilience amid an uncertain macroeconomic environment. Throughout the second quarter, most players in the industry were reeling under the greater-than-anticipated surge in inflationary pressures across the world. Mounting raw material costs, labor-supply constraints and supply-chain disruptions placed a strong chokehold on 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 Q2.

Overall, second-quarter earnings of the Medical sector are expected to rise a mere 1.5% on an 8.1% sales increase. This compares with the first-quarter reported earnings growth of 16.7% and revenue growth of 15.6%.

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.

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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 Q2.

Overall, the rebound in the base business through the months of the second quarter is expected to be impressive. Medical Device companies like Laboratory Corporation of America Holdings LH or LabCorp, Thermo Fisher Scientific Inc. TMO and Bio-Rad Laboratories, Inc. BIO are likely to have been positively influenced by these factors in Q2, despite continuing challenges in the macroeconomic front.

Let’s take a look at these three Medical Device players scheduled to announce results on Jul 28.

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 second-quarter sales performance. Meanwhile, the company has implemented a new LaunchPad business process improvement initiative, which is anticipated to deliver $350 million in savings over the next three years. The new initiative is expected to have contributed to the company’s second-quarter margin. (Read more: LabCorp to Report Q2 Earnings: What's in the Cards?)

The Zacks Consensus Estimate for total revenues of $3.82 billion for the second quarter suggests a 0.6% fall from the prior-year quarter’s reported figure. The consensus mark for LH’s earnings of $4.60 per share indicates a 24.9% decline 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.

LH has an Earnings ESP of +1.33% 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 EPS Surprise

 

Laboratory Corporation of America Holdings Price and EPS Surprise
Laboratory Corporation of America Holdings Price and EPS Surprise

Laboratory Corporation of America Holdings price-eps-surprise | Laboratory Corporation of America Holdings Quote

 

You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher: Through the months of the second quarter, 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 report growth driven by a favorable business mix and new launches, including four new gas chromatography and GC-MS instruments to advance analytical testing for food, environmental, industrial, and pharmaceutical applications. (Read more: What's in Store for Thermo Fisher in Q2 Earnings?)

The Zacks Consensus Estimate for TMO’s second-quarter earnings of $4.92 per share implies a 12.1% plunge from the year-ago reported figure. The consensus estimate for revenues is pegged at $9.84 billion, suggesting a 6.1% rise from the prior-year reported number.

TMO has an Earnings ESP of +2.96% 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

 

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 second 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 second-quarter top line. (Read more: Bio-Rad to Report Q2 Earnings: What's in the Cards?)

The Zacks Consensus Estimate for Bio-Rad’s second-quarter revenues is pegged at $664.6 million, which implies a decline of 7.2% from the year-ago figure. The consensus estimate for earnings per share is pegged at $2.46, suggesting a fall of 30.5% from the prior-year reported figure.

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

BioRad Laboratories, Inc. Price and EPS Surprise

 

BioRad Laboratories, Inc. Price and EPS Surprise
BioRad Laboratories, Inc. Price and EPS Surprise

BioRad Laboratories, Inc. price-eps-surprise | BioRad Laboratories, Inc. Quote

 

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


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report
 
Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report
 
BioRad Laboratories, Inc. (BIO) : Free Stock Analysis Report
 
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Zacks Investment Research