The Q2 earnings season is in full swing and, as per our latest Earnings Trends report, till July 22, 126 S&P 500 members (25.2% of the total index) have reported their quarterly numbers with almost 189 members still to report.
This busy earnings release week will more or less determine the direction of the season. Analysts are still pondering whether Q2 will break free from the two previous quarters of earnings declines. But be that as it may, we have some definite good news for investors keen on the Medical sector.
As per our report, Medical is 1 of the 7 broader sectors among the 16 Zacks sectors to report earnings growth this season. The sector is expected to deliver 1.8% earnings growth on the back of 7.7% higher revenues in the second quarter.
What's in Store for the Med-Product Space?
Medical product, a niche area under the medical device subcategory within the broader Medical sector, holds a lot of promise at this moment. This is because of the temporary two-year suspension of the controversial and dreadful 2.3% medical device excise tax which had taken a toll on the entire MedTech industry since its enactment in 2013. In addition, the shift in consumer demand and market dynamics has led to the growing prevalence of minimally invasive surgeries, liquid biopsy tests, and use of IT for ensuring quick and improved patient care among other things.
Let's take a look at the major medical product stocks slated to release their quarterly reports on July 28:
Boston Scientific CorporationBSX : This leading medical product company is scheduled to report second-quarter 2016 results before the opening bell on Jul 28. Pricing pressure has been relentless for Boston Scientific over the past several quarters. However, on an encouraging note, the company expects this headwind to dissipate gradually on the back of improved price management, primarily through market segmentation, tiered offerings and standard cost-reduction programs. This benefit is likely to be reflected in the second quarter. We are also optimistic about the company's gradually improving performance in Interventional Cardiology, led by an innovative portfolio and robust commercial teams globally.Meanwhile, MedSurg is expected to demonstrate consistent performance, primarily led by endoscopy.
Boston Scientific currently sports a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of 0.00%. While a favorable Zacks Rank #1 (Strong Buy) increases the predictive power of the ESP, a 0.00% ESP makes a surprise prediction uncertain.
(Read More: What Awaits Boston Scientific in Q2 Earnings? )
BOSTON SCIENTIF Price and EPS Surprise
ResMed Inc.RMD : This renowned worldwide provider of generators, masks, and related accessories for the treatment of sleep-disordered breathing (SDB) has completed the acquisition of Brightree - a health-information technology group. The deal is predicted to be accretive immediately to ResMed's gross margins and adjusted EPS. Notably, management estimates that the Brightree acquisition will have a positive impact of 70-100 basis points on ResMed's gross margin in the fourth quarter. Management is also confident of its strategy of continuing to make incremental investments across its research and development (R&D) portfolio, which in turn might raise R&D expenses for the quarter.
ResMed is scheduled to report fourth-quarter fiscal 2016 earnings on Jul 28, after the closing bell. Our proven model does not conclusively show that ResMed is likely to beat earnings this quarter as it has an Earnings ESP of -5.48% in spite of a Zacks Rank #3 (Hold).
(Read More: ResMed Q4 Earnings: Disappointment in the Cards? )
RESMED INC Price and EPS Surprise
Zimmer Biomet Holdings, Inc.ZBH : This orthopedic reconstructive products manufacturer is slated to report second-quarter 2016 financial numbers on Jul 28, before the opening bell. Overall, the market assumption for 2016 remains quite favorable for Zimmer Biomet. According to the company, the musculoskeletal market is expected to grow approximately 3% in 2016 with global market conditions remaining stable when compared to 2015.
During the last reported quarter, Zimmer Biomet witnessed severe revenue-related headwinds in its dental division caused by a supply disruption linked with a voluntary field action in response to a packaging issue. However, we are looking forward to the company's earlier commitment to resolve the issue by the end of the second quarter. If this matures favorably, we expect to see a rebound in the company's dental revenue down the line which may commence from the second quarter itself.
We expect Zimmer Biomet to beat expectations in the to-be-reported quarter as it currently carries a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +1.02%. While a favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise, a bullish Zacks rank increases the predictive power of the ESP.
(Read More: Zimmer Biomet Q2 Earnings: A Beat in the Cards? )
ZIMMER BIOMET Price and EPS Surprise
Meridian Bioscience, Inc.VIVO : This prominent life science company develops, manufactures, and distributes diagnostic test kits primarily for various gastrointestinal, viral, respiratory, and parasitic infectious diseases worldwide. Meridian Bioscience is expected to release third-quarter fiscal 2016 financial numbers on Jul 28. The company carries a Zacks Rank #3 (Hold) and has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are at 24 cents.
We note that the company's earnings were in line with the Zacks Consensus Estimate in three of the four trailing quarters with a miss in the remaining quarter. The trailing four-quarter average is a negative 1.19%.
MERIDIAN BIOSCI Price and EPS Surprise
Surmodics, Inc.SRDX : This worldwide provider of surface modification and in vitro diagnostic technologies is scheduled to release third-quarter fiscal 2016 financial numbers on Jul 28 before the market opens. The company carries a Zacks Rank #3 (Hold) and has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are at 9 cents.
We note that the company's earnings were ahead of the Zacks Consensus Estimate by 150% last quarter. The trailing four-quarter average beat is 95%.
SURMODICS Price and EPS Surprise
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