The earnings season is now well past the half-way mark with more than 60% Q2 earnings reports already released. As per our latest Earnings Preview report, there is a gradual improvement in the trend as compared to the past couple of quarters. The improving trend however fails to dispell the gloom as we still anticipate a fifth straight quarter of an earnings decline for the S&P 500 index.
Nonetheless, with the gradual improvement in the earnings scorecard, the analysts are slowly changing their stance by toning down the magnitude of the expected decline for the rest of the index members.
Medical, one of the 16 broader Zacks sectors, has been a stand out performer so far, much better than what we had expected at the beginning of the Q2 earnings release. Earnings growth rate stood at 5.4% year over year on account of a 1.2% rise in revenues. For the rest of the season, earnings are anticipated to grow 3.4%, driven by impressive top-line growth expectation of 7.7% in this sector. In fact, as per our report, the proportion of companies in the Medical sector beating revenue estimates is currently the highest within the S&P 500 index.
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 potential at this moment. The temporary two-year suspension of the controversial and dreadful 2.3% medical device excise tax, which took a toll on the entire MedTech industry since its enforcement in 2013, has brought in a much needed respite for this sector.. Moreover, the recent change in consumer demand and market dynamics led to a dramatic transformation in the entire healthcare system. This is evident from the growing prevalence of minimally invasive surgeries, rising demand for liquid biopsy tests, use of IT for ensuring quick and improved patient care along with the shift of the payment system to a value-based model.
Let's take a look at the major Medical Product stocks slated to release their quarterly reports on Aug 3:
Bio-Rad Laboratories, Inc.BIO
Bio-Rad is a provider of reagents, apparatus, and equipment to separate complex chemical and biological materials. The company also works to identify, analyze, and purify components for life science research, healthcare, analytical chemistry, and other markets.
The company is scheduled to report second-quarter 2016 numbers on Aug 3. However, our proven model does not conclusively show that Bio-Rad is likely to beat earnings this quarter as along with a Zacks Rank #3 (Hold), it has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are on par at $1.13.
While a positive Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise, a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 increases the predictive power of the ESP.
We note that the company's earnings remained ahead of the Zacks Consensus Estimate in three of the four trailing quarters. The trailing four-quarter average beat lies at 8.98%.
BIO-RAD LABS -A Price and EPS Surprise
Cardiovascular Systems Inc.CSII
This prominent medical device company, develops, manufactures, and distributes devices to treat vascular diseases in the U.S. Cardiovascular Systems is expected to release its fourth-quarter 2016 financial numbers on Aug 3. The company carries a Zacks Rank #3 and has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 20 cents per share.
We note that the company's earnings remained in line with the Zacks Consensus Estimate in all the four trailing quarters with average beat lying at 11.98%.
CARDIOVASCLR SY Price and EPS Surprise
Conatus Pharmaceuticals Inc.CNAT
This is a U.S.-based biotechnology company that works on the development and commercialization of novel medicines to treat liver diseases. Conatus Pharmaceuticals is scheduled to release its second-quarter 2016 financial numbers on Aug 3. The company holds a Zacks Rank #3 and has a favorable Earnings ESP of +5.41%. That is because the Most Accurate Estimate stands higher at a loss of 35 cents while the Zacks Consensus Estimate remains at a loss of 37 cents per share.
We note that the company's earnings remained in line with the Zacks Consensus Estimate in the last quarter. The trailing four-quarter average beat lies at 9.72%.
CONATUS PHARMA Price and EPS Surprise
INSYS Therapeutics, Inc.INSY
This specialty pharmaceutical company that develops and markets supportive care products which include Subsys, a sublingual fentanyl spray for cancer pain in opioid-tolerant cancer patients. The company is scheduled to report its second-quarter 2016 earnings on Aug 3.
Currently, INSYS Therapeutics holds a Zacks Rank #3 and has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are at earnings of 5 cents per share.
INSYS THERAP Price and EPS Surprise
Headquartered in Rockville, MD, this is a biopharmaceutical company working on antibody-based therapeutics for the treatment of cancer primarily by modulating the human immune system, as well as various autoimmune disorders and infectious diseases. The company is slated to report its second-quarter 2016 earnings on Aug 3.
The company carries a Zacks Rank #3 and has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 65 cents per share. We note that the company's earnings missed the Zacks Consensus Estimate in all of the past four quarters with an average miss at 64.97%.
MACROGENICS INC Price and EPS Surprise
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