We expect medical device maker CR Bard ( BCR ) to beat expectations when it reports second quarter 2013 results on Jul 23.
Why a Likely Positive Surprise?
Our proven model shows that Bard is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP : Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method ), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +0.73%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #3 (Hold) : CR Bard currently carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Bard's Zacks Rank # 3 (Hold) and ESP of +0.73% makes us very confident in looking for a positive earnings beat on Jul 23.
What is Driving the Better-Than-Expected Earnings?
Recently, in an effort to streamline its business, the company agreed to divest certain assets of its Electrophysiology (EP) division to Boston Scientific ( BSX ). Management believes that the divestment will help the company to focus on other high-growth businesses, which in turn should boost top line.
We are of the opinion that the divestment of the underperforming EP division complements CR Bard's long-term strategy to focus on its business in lucrative markets that will deliver higher returns. The capital from the divested business will help the company to invest in areas with increasing opportunities. We believe that CR Bard's initiatives to expand in emerging markets bode well going forward.
Moreover, Bard remains committed to deliver incremental returns to investors through dividends and share repurchase programs. The company recently hiked its dividend by 5% and authorized a $500 million share repurchase program.
Despite being entangled in a number of lawsuits, we wait to see how CR Bard utilizes the expected benefits from the Gore litigation lawsuit.
Other Stocks to Consider
CR Bard is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 2 industry peers:
Sarepta Therapeutics, Inc. ( SRPT ), Earnings ESP of +27.78% and Zacks Rank #1 (Strong Buy)
Edwards Lifesciences Corp. ( EW ), Earnings ESP of +1.32% and Zacks Rank #2 (Buy)