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EW vs. BCR: Which Stock is Poised for Better Q3 Earnings?

The Q3 earnings season had kick-started last week with results from 87 S&P 500 participants (24.7% of the total market cap) having been reported so far. We observed the S&P 500 index to have made a pretty good opening with respect to both earnings and revenue growth. Per the latest Earnings Preview , till Oct 20, 2017, total earnings for these members went up 9.4% on 7.3% higher revenues.

With 180 S&P 500 members lining up for releasing their quarterly results this week, we are decidedly bullish about the equity market scenario, gradually demonstrating an improvement from the sequentially last quarter.

A Look at MedTech Space Within Medical Sector

While overall growth has been steadily accelerating from the preceding few quarters' performances, investors are concerned about the Medical sector (one of the 16 Zacks sectors) that has seen a lot of struggle during the past half year, thanks to the political power change and the ongoing policy restructuring related battle.

This lack of visibility befuddles the favorable trend this sector was maintaining over the past few quarters. For the third quarter, the expected earnings growth rate is standing at 2.2% on 4.8% revenue growth projection. In comparison, the reported earnings growth rate of second-quarter 2017 was quite impressive at 7% on 4.4% revenue growth.

Needless to say, that the current crisis in the U.S. MedTech industry, integral part of the broader Medical sector, shows no signs of abating. MedTech space was earlier hopeful about the change of power within the White House. However, it is currently fussing over the total failure of the Republicans' ObamaCare repeal and replacement. Considering the prevailing uncertainty over the implementation of the health policy, any respite from it in the near term seems unlikely.

Political turmoil and the health policy related battle apart, majority of the stocks' bottom line within this space is likely to be hurt in the third quarter on escalating costs induced by the consecutive hurricanes and Mexico earthquakes.

Given this gloomy backdrop, investors interested in the MedTech space will keenly await the earnings reports of key MedTech companies namely, Edwards Lifesciences CorporationEW and C. R. Bard, Inc.BCR on Oct 24.

Per our quantitative model, when stocks with a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) are combined with a positive Earnings ESP , then chances of beating estimates are always high. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

A Sneak Peek at Both Stocks

Similar to the sequentially-last quarter, Edwards Lifesciences seems to be gaining from its strong Transcatheter Heart Valve Therapy (THVT) segment. Banking on continued therapy adoption across all geographical regions with notable strength in the United States, the company is expected to maintain this bullish trend in the third quarter of 2017 as well.

Growth in THVT was driven by excellent clinical performance results from SAPIEN 3 as well as a continued strong therapy implementation across all regions in the last quarter. Also, with the receipt of an expanded FDA approval for SAPIEN 3 valve in early June, the top line at the THVT segment is expected to get a further boost this yet-to-be-reported quarter. (Read: Will Edwards Lifesciences Gain on THVT in Q3 Earnings? )

The Zacks Consensus Estimate for THVT net sales of $496 million reflects an increase of 20.9% from the year-ago quarter. The Zacks Consensus Estimate for transcatheter heart valves (THV) sales in the United States of $322 million shows an increase of 23.8% from the year-ago quarter. Overall, third-quarter revenues are projected at $833.89 million. Also, the Zacks Consensus Estimate for net sales in the United States of $467 million reflects an increase of 11.9% from the year-ago quarter.

Notably, the company's earnings have outpaced the Zacks Consensus Estimate by an average of 10.8% in the trailing four quarters. While Edwards Lifesciences has an Earnings ESP of -2.32%, it carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Further, the stock has seen the Zacks Consensus Estimate for third-quarter earnings of 87 cents per share being revised a penny downward over the last seven days. However, it has shown a rally of 26.4% from the year-ago reported figure. The Zacks Consensus Estimate for the company's revenues is pegged at $834 million for the yet-to-be-reported quarter, an 11.5% improvement from the year-ago reported number of $748 million.

In this regard, we also anticipate the company's arch rival in transcatheter heart valves space, Boston Scientific Corporation BSX , to fare well in the business this third quarter. Boston Scientific is slated to report third-quarter 2017 numbers on Oct 26, before the market opens.

Edwards Lifesciences Corporation Price and EPS Surprise

Edwards Lifesciences Corporation price-eps-surprise | Edwards Lifesciences Corporation Quote

Looking into C.R. Bard 's recent performance trend, we believe that the growing adoption of the company's flagship Lutonix drug coated-balloon (DCB) will continue to be the key growth catalyst in the soon-to-be-reported quarter. Within the Endovascular business, peripheral PTA line sales are solely driven by an accelerating demand for the Lutonix DCB in the United States. We expect this product to significantly contribute to the company's top line in this quarter. (Read: Can CR Bard Spring a Surprise This Earnings Season? )

Notably, the company's earnings have outpaced the Zacks Consensus Estimate by an average of 4.03% in the trailing four quarters. While C.R. Bard has an Earnings ESP of -0.09%, it carries a Zacks Rank of 3.

The stock has seen the Zacks Consensus Estimate for third-quarter earnings of $2.95 per share being revised a penny downward over the last 30 days. However, it has shown an improvement of 15.6% from the year-ago reported figure. The Zacks Consensus Estimate for the company's revenues is pegged at $992 million for the yet-to-be-reported quarter as compared to the year-ago reported figure of $932 million, reflecting a 6.4% gain.

In this regard, we note that C.R. Bard is slated to be acquired by Becton, Dickinson and Company BDX for $24 billion in the fourth quarter of 2017. This acquisition is expected to strengthen the company's footprint in the home healthcare market in the United States.

C.R. Bard, Inc. Price and EPS Surprise

C.R. Bard, Inc. price-eps-surprise | C.R. Bard, Inc. Quote

Comparative Analysis

Analyzing all the revenue drivers and other fundamental factors for both Edwards Lifesciences and C.R. Bard along with their respective Zacks Consensus Estimates, we may conclude that Edwards Lifesciences is expected to perform better than C.R. Bard in the yet-to-be-reported quarter.

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Boston Scientific Corporation (BSX): Free Stock Analysis Report

Edwards Lifesciences Corporation (EW): Free Stock Analysis Report

C.R. Bard, Inc. (BCR): Free Stock Analysis Report

Becton, Dickinson and Company (BDX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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