Medical Product Stocks Earnings on Apr 25: SYK, EW, LH

We are entering the heart of the Q1 earnings season, with more than 50% S&P 500 members expected to come up with results by the end of this week.

The Story So Far

According to the latest Earnings Preview, 95 S&P 500 participants reported results till end of last week. These combined account for 24.9% of the index’s total market capitalization. Total earnings for these companies are up 14.3% from the same period last year on 4.6% higher revenues, with 72.6% beating EPS estimates and 62.1% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is 51.6%. With a market-thumping 100% beat ratio for EPS estimates and an 80% revenue beat ratio, ‘Medical’ was one of the top performing S&P sectors last week.

Our preview shows that first-quarter earnings for the S&P 500 companies are expected to be up 9.1% from the year-ago quarter on 6.0% higher revenues. With the majority of earnings yet to be released, next week will be crucial in deciding whether this quarter will actually turn out to be a game changer. Irrespective of the outcome, there will definitely be good news for investors focusing on the Medical sector.

Per the report, Medical is one of the broader sectors among the 16 Zacks sectors that are expected to report earnings growth in the first quarter. The sector is expected to witness 0.8% earnings growth on the back of 6.3% higher revenues.

What Lies for Medical Product This Earnings Season

Medical product, an important part of the medical device subcategory within the broader Medical sector, looks promising at the moment. Investors are also bullish about the space as seen from the fact that the Zacks categorized Medical-Products industry registered growth of 7.23% in the last three months, comfortably outperforming the S&P 500 Index that gained around 2.78% only.

However, the failure of the Republicans to repeal the Affordable Care Act or Obaamcare with a replacement plan last month has kept the space in doldrums. This has forced Republicans to propose amendments for setting aside funds to cover a portion of costs alongside insurers. The foremost question that arises now is whether Medical Product players stand to gain or lose from the conundrum. The medical device fraternity was earlier happy with the original Trump action plan which had promised cancellation of major healthcare taxes including the two signature taxes of Obamacare, the unpopular Cadillac tax (40% excise tax on high-cost healthcare plans) and the controversial 2.3% MedTech tax.

According to the MedTech community, the cancellation of the above taxes will directly address issues like lack of opportunity for research and development, innovation, pipeline development and help in making investments needed to accelerate patient and provider access to innovative health care products. This will also help in boosting job creation and quality of patient care, offering companies in the space an opportunity to strengthen their position to cope with the new situation.

Since the final outcome of Trump’s proposed health care policy is no way near, investors have shifted their focus to the hot topic of the first-quarter earnings season.

Let’s take a sneak peek into the expected performance of three major medical product companies that are expected to report earnings on Apr 25.

Stryker Corporation SYK is set to report first-quarter figures on Apr 25, after market close. The company’s expanding product portfolio is a key catalyst in our view. Moreover, back-to-back acquisitions like Physio-Control International, Synergetics USA and Sage Products LLC are expected to drive overall growth.

Our model shows that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for an earnings beat. Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Going by our model, Stryker is likely to beat earnings estimates because it has the right combination of a Zacks Rank #3 and an Earnings ESP of +1.40%. (Read more: Will Stryker Deliver a Beat this Earnings Season?)

 

Stryker Corporation Price and EPS Surprise

 

Stryker Corporation Price and EPS Surprise | Stryker Corporation Quote

Edward Lifesciences Corp. EW is expected to release its first-quarter fiscal 2017 financial numbers on Apr 25. This prominent life science company came up a promising global sales performance in the last reported fourth quarter of 2016, primarily buoyed by strong Transcatheter Heart Valve sales.

The company has an Earnings ESP of 0.00% because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 82 cents. This makes surprise prediction difficult although the company carries a Zacks Rank #3. (Read More: Edward Lifesciences Q1 Earnings: A Surprise in Store?)

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

Edwards Lifesciences Corporation Price and EPS Surprise

 

Edwards Lifesciences Corporation Price and EPS Surprise | Edwards Lifesciences Corporation Quote

Laboratory Corp. of America Holdings LH is slated to report first-quarter 2017 financial numbers on Apr 25. Last quarter, the company reported a positive earnings surprise of 0.94%. The average beat is 0.78% for the trailing four quarters. However, the recently completed acquisition of Sequenom may hurt the company’s operating margin in the to-be-reported quarter due to its unfavorable product margin.

Laboratory Corp. currently has a Zacks Rank #4 and an Earnings ESP of -1.83%. This is because the Most Accurate estimate stands at $2.17, which is lower than the Zacks Consensus Estimate of $2.19. The combination makes surprise prediction difficult. (Read More: Will LabCorp Pull a Surprise this Earnings Season?)

Laboratory Corporation of America Holdings Price and EPS Surprise

 

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

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Stryker Corporation (SYK): Free Stock Analysis Report
 
Edwards Lifesciences Corporation (EW): Free Stock Analysis Report
 
Laboratory Corporation of America Holdings (LH): Free Stock Analysis Report
 
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