The fourth quarter earnings season so far has successfully demonstrated all signs for a steady improvement over the last seven quarters. Finance, in particular, is doing extremely well and energy entering into the positive zone with regards to earnings growth for the first time in more than two years.
We are almost halfway through the reporting cycle, and per the Earnings Trend report, till Feb 1, 219 S&P 500 members (58.8% of the total market cap) have come up with their quarterly numbers. With the majority still to report, total earnings for these members have gone up 5.4% on 3.5% higher revenues.
Per the report, Medical is one of the 13 broader sectors among the 16 Zacks sectors which have so far reported earnings growth. Among the 44.4% of the members from this sector who have made their quarterly releases, earnings and revenue beats are standing at impressive levels of 64.8% and 53.4%, respectively. The sector has delivered 11.5% earnings growth on the back of 5.4% higher revenues in the fourth quarter.
What's in Store for the Med-Product Space?
Medical Products, an important part of the medical device subcategory within the broader Medical sector, holds a lot of promise at this moment. We note that the republican win has ensured a great victory for the entire 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 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 make 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.
According to a survey by KPMG, the companies under this category that expect to spend more than 6% of revenues on R&D/innovation is rising and is fast exceeding the number of companies spending on R&Ds in other manufacturing industries. These innovations and breakthroughs can be of various forms - new products or surgical techniques or cost-effective products targeting the emerging markets.
Let's take a look at the major Medical products stocks slated to release their quarterly reports on Feb 6:
Haemonetics CorporationHAE
This is a renowned provider of blood management solutions to customers encompassing blood and plasma collectors, hospitals and health care providers globally. The company is currently facing several headwinds including gross margin pressure, product recall, continued underperformance at the Blood Center and Cell Processing franchises. However, a strong cash position raises investors' confidence in the stock. Haemonetics is slated to report its third-quarter fiscal 2017 numbers.
Our proven model does not conclusively show that Haemonetics is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here. You can see the complete list of today's Zacks #1 Rank stocks here .
Haemonetics currently holds a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate as well as the Zacks Consensus Estimate stand at 40 cents. We note that, 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.
Haemonetics Corporation Price and EPS Surprise
Haemonetics Corporation Price and EPS Surprise | Haemonetics Corporation Quote
Phibro Animal Health CorporationPAHC
This company is engaged in the designing, manufacturing, packaging, distribution, and marketing of medical, surgical, diagnostic, and patient care devices worldwide. A wide range of products, significant presence in emerging markets and a recurring revenue system are key positives. Customer consolidation can adversely affect Phibro's revenues. Moreover, headwinds such as unfavorable currency movements and tough competitive scenario continue to pose threats.
Phibro Animal Health is scheduled to report second-quarter fiscal 2017 earnings, after market close. While a favorable Zacks Rank #3 increases the predictive power of the ESP, a 0.00% ESP makes a surprise prediction uncertain. Both the Most Accurate estimate and the Zacks Consensus Estimate are on par at 36 cents. We note that, in the last reported quarter, the company registered an earnings beat of 2.86% while the trailing 12-month average surprise came in at negative 2.66%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Phibro Animal Health Corporation Price and EPS Surprise
Phibro Animal Health Corporation Price and EPS Surprise | Phibro Animal Health Corporation Quote
Luminex CorporationLMNX
This is a manufacturer and marketer of proprietary biological testing technologies with applications throughout the life sciences and diagnostics industry. While we are upbeat about Luminex making significant progress with its ARIES system, plethora of regulatory approvals, and accretive acquisitions, reimbursement risk, reduced spending on research and diagnostics and fluctuations in consumables revenues are major headwinds. Luminex is scheduled to report fourth-quarter 2016 results.
Luminex currently has a Zacks Rank #3 and an Earnings ESP of +75%, indicating a likely positive earnings surprise. We note that, in the last reported quarter, the company registered an earnings miss of 50% while the trailing 12-month average surprise came in at positive 71.12%(read more: Luminex Projects Strong Q4 Revenues, Issues 2017 Guidance )
Luminex Corporation Price and EPS Surprise
Luminex Corporation Price and EPS Surprise | Luminex Corporation Quote
NantHealth, Inc.NH
This is a next-generation, evidence-based, personalized healthcare company enabling improved patient outcomes and more effective treatment decisions for critical illnesses. NantHealth is expected to report its fourth-quarter 2016 results. The company currently holds a Zacks Rank #4 and has an Earnings ESP of 0.00%. We note that, in the last reported quarter, the company registered an earnings beat of 18.52% while the trailing 12-month average surprise came in at a positive 13.88%.
NantHealth, Inc. Price and EPS Surprise
NantHealth, Inc. Price and EPS Surprise | NantHealth, Inc. Quote
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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.
