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Medical Product Stocks' Earnings on Jan 23: ABT, NXGN & VAR

The fourth-quarter earnings season has seen releases from 55 members in the S&P 500 cohort as of Jan 18. Per the latest Earnings Preview , performances of these index participants indicate a 16.9% increase in total earnings on 9% higher revenues.

By the end of the season, earnings of the S&P 500 companies, as a whole, are expected to grow 10.7% from the year-ago quarter on a 5.3% rise in revenues.

Earnings Expectations From Medical Sector

Medical - one of the 16 Zacks sectors - is expected to record earnings growth this season. For the quarter under review, the projected earnings growth rate for the sector is 7.2% on 6.1% revenue growth.

What's in Store for the Medical Products Space?

Going by a CISION report, United States is the largest Medical Products market in the world, raking in more than $180 billion in revenues a year. It has clearly been a very profitable investment space of late.

The sector benefits from favorable consumer behavior, growing prevalence of minimally-invasive surgeries, demand for liquid biopsy tests, use of IT for quick and improved patient care along with the shift of the payment system to a value-based model.

The latest Tax Cuts and Jobs Act, which among many other changes, slashed corporate tax rates to 21% from the earlier 35%, has provided impetus to the market.

This apart, U.S. medical device companies are currently riding on R&D innovation, courtesy of the 2.3% Medical Device tax abolition earlier this year. According to an article published in Xtalks, the Medical Device tax was responsible for a $34-million reduction in R&D spending by companies. The bill also delays the Cadillac tax, a 40% tax on employer insurance, until 2022.

However, the Medical Products space is confronted with short-term hurdles associated with the U.S.-China trade war. According to a survey conducted by the Medical Imaging & Technology Alliance (MITA), the tariffs will cost Medical Products companies nearly $138 million every year.

Companies will thus be compelled to reduce workforce and investments in R&D to meet this 'new and unnecessary expense.' This also increases the chances of costs being passed on to end users, making healthcare more expensive.

Against this backdrop, let's take a look at a few leading Medical Product stocks scheduled to release earnings numbers on Jan 23:

Per the quantitative Zacks model, stocks with the perfect combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have substantially higher chances of beating estimates. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Abbott LaboratoriesABT is anticipated to gain from a strong fourth-quarter performance by the Established Pharmaceuticals Division business. The division has been recording impressive operational sales growth over the last few quarters. The consistent strength in the Diagnostics business, courtesy of contributions from all sub-segments, namely, Core Laboratories Diagnostics, Molecular Diagnostics and Point of Care is also encouraging (read more: What Lies Ahead for Abbott Stock This Earnings Season? ).

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $7.79 billion, reflecting a year-over-year rise of 2.6%. The consensus estimate for adjusted earnings per share stands at 81 cents, indicating an increase of 9.5%. Abbott delivered positive surprises in the trailing four reported quarters, the average being 1.82%.

However, our quantitative Zacks model does not conclusively show an earnings beat for the company, given the combination of a Zacks Rank of 3 and an Earnings ESP of 0.00%.

NextGen Healthcare, Inc.NXGN is expected to gain from consistent momentum in quarterly bookings on the company's growing pipeline and coveted RCM (Revenue Cycle Management) services platform in its upcoming third-quarter fiscal 2019 results. Strength in the company's flagship NextGen Mobile and NextGen Office solutions can also be a major growth driver.

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $130.79 million, reflecting a year-over-year decline of 0.7%. The Zacks Consensus Estimate for adjusted earnings per share stands at 15 cents, flat on a year-over-year basis. On average, Quality Systems delivered a positive earnings surprise of 13.7% for three of the trailing four quarters.

However, our quantitative Zacks model does not conclusively predict an earnings beat for the company, given the combination of a Zacks Rank of 3 and an Earnings ESP of 0.00%.

Varian Medical Systems, Inc . VAR is likely to gain from a strong overseas presence and product launches in the upcoming first-quarter fiscal 2019 results. (read more: Varian Medical to Report Q1 Earnings: What's in Store? )

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $717.88 million, reflecting a year-over-year rise of 5.8%. The Zacks Consensus Estimate for adjusted earnings per share stands at $1.06, flat year over year. On average, Varian Medical delivered a positive earnings surprise of 4.3% over three of the trailing four quarters.

However, our quantitative Zacks model does not conclusively predict an earnings beat for the company, given the combination of a Zacks Rank of 3 and an Earnings ESP of 0.00%.

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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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