The Q4 earnings season has kick-started on a pretty bullish tone, probably attributable to the Trump effect. Per the latest Earnings Preview report, so far the earnings and revenue growth performance are on track to beat the last seven consecutive quarters' performance. Till Jan 20, 63 S&P 500 members (19.2% of the total market cap) have released their quarterly numbers with the majority still left to report. Total earnings for these members have gone up 4.7% on 2.7% increase in revenues.
The medical sector, one of the 16 broader Zacks sectors is no exception to this positive trend. So far 1.9% members from this sector have come up with their quarterly earnings releases with earnings and revenue beats standing at impressive levels of 100% each. With more and more companies lining up for their earnings announcement, the aggregate growth pace of this sector is expected to pick up further steam.
What's in Store for the Medical Products Space?
The Zacks categorized Medical - Products industry, 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 medical product 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 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.
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 Jan 26:
ABIOMED, Inc.ABMD : The company is slated to report its third-quarter fiscal 2017 numbers. Headquartered in Danvers, MA, Abiomed is engaged in developing, manufacturing and marketing of medical products, designed to assist or replace the pumping function of a failing heart. We are upbeat about the fact that, Abiomed's Impella utilization is accelerating at a remarkable pace with an increasing number of hospitals and customer sites purchasing the same. We believe that the flagship Impella product line is a significant growth catalyst for the company.
However, our proven model does not conclusively show that Abiomed 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 .
Abiomed currently holds a Zacks Rank #4 (Sell) and has an Earnings ESP of -3.45%. That is because the Most Accurate estimate of 28 cents is lower than the Zacks Consensus Estimate of 29 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.
ABIOMED, Inc. Price and EPS Surprise
C. R. Bard Inc.BCR : This company is scheduled to report fourth-quarter 2016 earnings, after market close. It 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 the key positives.
While a favorable Zacks Rank #3 (Hold) 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 stand at $2.73. We note that, in the last reported quarter, the company registered an earnings beat of 3.53% and the trailing 12-month average surprise came in at negative 4.07% (read more: C.R. Bard to Report Q4 Earnings: A Surprise in Store? ).
C.R. Bard, Inc. Price and EPS Surprise
Abaxis, Inc.ABAX : The company is scheduled to report its fourth-quarter 2016 results. It is a California.-based manufacturer of portable Medical (human) and Veterinary (animal) blood analysis systems that provide clinicians with rapid blood constituent measurements in medical and veterinarian markets worldwide.
Abaxis currently carries a Zacks Rank #5 (Strong Sell) and has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 30 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
ABAXIS, Inc. Price and EPS Surprise
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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.