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3 Medical Device Stocks Likely to Beat Earnings Estimates
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As we are fast approaching the day when the new president will disclose his final plan to replace the Affordable Care Act and propose his "insurance for everybody" strategy, the nation is clearly divided into ‘we need’ and ‘don’t need’ camps for the existing healthcare policy.
Amid all this, one thing is pretty clear. The republican win has ensured a great victory for the entire medical device industry as the likely revocation of the 2.3% medical device excise tax is going to be a big bonus for both the behemoths and small players.
According to the medical device trade association, AdvaMed, the entire MedTech fraternity is looking forward to the new policymakers who will be working on improving the FDA regulatory process, repeal the medical device tax, and ensure that the coverage process allows patients access to the latest innovations.
This dreadful tax, which was commonly addressed as ‘fund of the ACA’, simply took a toll on the entire medical device industry, since its enactment in 2013. Data published in a report in FierceMedical Device stated that, in 2014, Johnson & Johnson made a payment of $180 million in medical device tax payments, while Medtronic (MDT), legacy Covidien, Smith & Nephew (SNN) paid $112 million, $60 million and $25 million, respectively.
According to the MedTech community, the cancellation of this tax along with other taxes will directly address issues like lack of opportunity for research and development, innovation, pipeline development and to make the 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 up with the new situation.
Ahead of Q4
The fourth quarter earnings season has already begun and we expect the bullish trend in the MedTech sector to continue. Apart from the factors discussed above, the medical device industry is governed by some powerful long-term tailwinds, including mergers & acquisitions (M&A), emerging market expansion, positive demographic trends and new product innovation, all of which have been the vital force behind the continued uptrend.
In addition, the recent change in consumer demand and market dynamics led to a dramatic transformation in the healthcare system. This is evident from the growing prevalence of minimally invasive surgeries, rising demand for liquid biopsy tests, use of IT for ensuring quick and improved patient care and the shift of the payment system to a value-based model among others.
Making the Right Choice
Given the numerous stocks in the medical device sector that almost always muddle up one’s stock-picking prowess, the Zacks methodology could offer some relief. One can narrow down the choices by focusing specifically on 'Medical - Instruments' and 'Medical - Products' stocks (two specialized chunks under the medical device subcategory) that sport the desirable combination of a positive Earnings ESP and a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Going by this criterion, we hereby present three medical device stocks that are poised to beat estimates this quarter.
Intuitive Surgical designs, manufactures and markets the da Vinci surgical system and related instruments and accessories, which is an advanced robot-assisted surgical system. Over the past six months, Intuitive Surgical has outperformed the broader industry trends in terms of price performance. The company lost almost 0.87%, narrower than the Zacks categorized Medical Instrument industry’s loss of 4.6%. We believe incremental spending on product development and higher investments in international markets are prudent moves that will drive long-term growth.
Intuitive Surgical is scheduled to report its fourth-quarter 2016 numbers on Jan 24. We expect the company to beat our fourth-quarter earnings estimates as it has a favorable combination of a Zacks Rank #3 and an Earnings ESP of +1.71%.
This renowned medical device maker operates in the global orthopedic market. The company has three business segments: Orthopaedics, MedSurg, and Neurotechnology & Spine. The past six months have been favorable for the stock. The company recorded a gain of almost 1.07%, as compared to the Zacks categorized Medical Product industry's loss of 5.71%. We believe Stryker’s acquisition-driven strategy will boost growth by expanding existing product offerings across all business segments, while an enhanced international presence should also support the growth of its global business.
Stryker is scheduled to report its fourth-quarter 2016 numbers on Jan 24. We expect the company to beat our fourth-quarter earnings estimates as it has a favorable combination of an Earnings ESP of +0.57% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hologic provides diagnostics, medical imaging systems and surgical products, which cater to the healthcare needs of women. The company is focused on mammography systems for breast examination and osteoporosis assessment. In the past six months, Hologic has consistently traded higher than the Zacks categorized broader Medical products industry. So far the stock has gained 10.26% as against the 4.6% decline of the broader industry. A series of consistent product launches along with strong focus on international expansion were primary factors behind the company’s solid performance through this period.
Hologic is scheduled to report its first-quarter fiscal 2016 numbers on Feb 1. We expect the company to beat first-quarter earnings estimates as it has a favorable combination of a Zacks Rank #3 and an Earnings ESP of +1.96%.
Zacks' Top 10 Stocks for 2017
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Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
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3 Medical Device Stocks Likely to Beat Earnings Estimates
As we are fast approaching the day when the new president will disclose his final plan to replace the Affordable Care Act and propose his "insurance for everybody" strategy, the nation is clearly divided into ‘we need’ and ‘don’t need’ camps for the existing healthcare policy.
Amid all this, one thing is pretty clear. The republican win has ensured a great victory for the entire medical device industry as the likely revocation of the 2.3% medical device excise tax is going to be a big bonus for both the behemoths and small players.
According to the medical device trade association, AdvaMed, the entire MedTech fraternity is looking forward to the new policymakers who will be working on improving the FDA regulatory process, repeal the medical device tax, and ensure that the coverage process allows patients access to the latest innovations.
This dreadful tax, which was commonly addressed as ‘fund of the ACA’, simply took a toll on the entire medical device industry, since its enactment in 2013. Data published in a report in FierceMedical Device stated that, in 2014, Johnson & Johnson made a payment of $180 million in medical device tax payments, while Medtronic (MDT), legacy Covidien, Smith & Nephew (SNN) paid $112 million, $60 million and $25 million, respectively.
According to the MedTech community, the cancellation of this tax along with other taxes will directly address issues like lack of opportunity for research and development, innovation, pipeline development and to make the 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 up with the new situation.
Ahead of Q4
The fourth quarter earnings season has already begun and we expect the bullish trend in the MedTech sector to continue. Apart from the factors discussed above, the medical device industry is governed by some powerful long-term tailwinds, including mergers & acquisitions (M&A), emerging market expansion, positive demographic trends and new product innovation, all of which have been the vital force behind the continued uptrend.
In addition, the recent change in consumer demand and market dynamics led to a dramatic transformation in the healthcare system. This is evident from the growing prevalence of minimally invasive surgeries, rising demand for liquid biopsy tests, use of IT for ensuring quick and improved patient care and the shift of the payment system to a value-based model among others.
Making the Right Choice
Given the numerous stocks in the medical device sector that almost always muddle up one’s stock-picking prowess, the Zacks methodology could offer some relief. One can narrow down the choices by focusing specifically on 'Medical - Instruments' and 'Medical - Products' stocks (two specialized chunks under the medical device subcategory) that sport the desirable combination of a positive Earnings ESP and a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Going by this criterion, we hereby present three medical device stocks that are poised to beat estimates this quarter.
Intuitive Surgical, Inc. (ISRG - Free Report)
Intuitive Surgical designs, manufactures and markets the da Vinci surgical system and related instruments and accessories, which is an advanced robot-assisted surgical system. Over the past six months, Intuitive Surgical has outperformed the broader industry trends in terms of price performance. The company lost almost 0.87%, narrower than the Zacks categorized Medical Instrument industry’s loss of 4.6%. We believe incremental spending on product development and higher investments in international markets are prudent moves that will drive long-term growth.
Intuitive Surgical is scheduled to report its fourth-quarter 2016 numbers on Jan 24. We expect the company to beat our fourth-quarter earnings estimates as it has a favorable combination of a Zacks Rank #3 and an Earnings ESP of +1.71%.
Stryker Corporation (SYK - Free Report)
This renowned medical device maker operates in the global orthopedic market. The company has three business segments: Orthopaedics, MedSurg, and Neurotechnology & Spine. The past six months have been favorable for the stock. The company recorded a gain of almost 1.07%, as compared to the Zacks categorized Medical Product industry's loss of 5.71%. We believe Stryker’s acquisition-driven strategy will boost growth by expanding existing product offerings across all business segments, while an enhanced international presence should also support the growth of its global business.
Stryker is scheduled to report its fourth-quarter 2016 numbers on Jan 24. We expect the company to beat our fourth-quarter earnings estimates as it has a favorable combination of an Earnings ESP of +0.57% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hologic, Inc. (HOLX - Free Report)
Hologic provides diagnostics, medical imaging systems and surgical products, which cater to the healthcare needs of women. The company is focused on mammography systems for breast examination and osteoporosis assessment. In the past six months, Hologic has consistently traded higher than the Zacks categorized broader Medical products industry. So far the stock has gained 10.26% as against the 4.6% decline of the broader industry. A series of consistent product launches along with strong focus on international expansion were primary factors behind the company’s solid performance through this period.
Hologic is scheduled to report its first-quarter fiscal 2016 numbers on Feb 1. We expect the company to beat first-quarter earnings estimates as it has a favorable combination of a Zacks Rank #3 and an Earnings ESP of +1.96%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>