The third-quarter 2024 earnings season has just kicked off for the MedTech space, with a number of bigwigs scheduled to release their results this week. Per the latest Earnings Preview, quarterly results of the broader Medical sector are projected to improve year over year, backed by strong product revenues on demand growth across all industries, offsetting the shortcomings generated from worldwide geopolitical issues and healthcare labor shortages. However, bottom-line results might significantly lag the second-quarter performance due to the Middle East issues leading to an oil price crisis and supply disruptions. FX headwinds might have also aggravated during the third quarter.
Going by the broader Medical sector’s scorecard, 5.2% of the companies in the sector, constituting 20.2% of its market capitalization, reported earnings till Oct. 16. Earnings declined 1.8% year over year despite 8.1% higher revenues. Each of these index members beat earnings and revenue estimates.
Overall, third-quarter earnings of the Medical sector are expected to improve 6.4% on 8.5% revenue growth. This compares with the second-quarter earnings decline of 19.3% in spite of revenue growth of 8.4%.
Some major industry players like Boston Scientific Corporation BSX, Thermo Fisher Scientific TMO and Align Technology ALGN are set to report results tomorrow.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Factors Likely to Influence MedTech Stocks' Results
Replicating the broader market trend, MedTech or the Zacks-defined Medical Products companies are expected to report collective sales growth in the third quarter. Over the past couple of quarters, the industry has benefited from an increasing rate of hospitalization, leading to growing demand for a broad array of medical devices. Further, the rapid adoption of generative Artificial Intelligence (genAI) and digital therapies is expected to have generated a significant revenue stream in the third quarter.
Also, for several quarters, diagnostic testing companies have been witnessing a severe year-over-year decline in testing demand, compared to strong demand in the year-ago period for COVID-19 testing products. Although, this time, too, we expect to see another quarter of year-over-year decline in diagnostics revenues, the magnitude of this decline may have reduced because, during the third quarter of 2023, diagnostic revenues were already soft for the companies (in May 2023, WHO declared an end to COVID-19 as a public health emergency).
Macro trends that have been setting the stage for even more innovation and investment in this space are an aging population, growing healthcare awareness and increasing access to better health options. Favorable impacts from these are expected to be seen in the third-quarter results.
Yet, the industry continues to be in a difficult position due to the difficult geopolitical environment, supply chain bottlenecks that result in high costs for labor and raw materials, as well as shortage of freight and healthcare workers.
MedTech Stocks to Watch
Boston Scientific: Through the first half of 2024, U.S. hospitals experienced an increase in hospital admissions across many facilities. This significantly increased demand for Boston Scientific’s products during this period. With this trend projected to continue through the third quarter of 2024 as well, BSX, with its innovative pipeline, expansion into faster growth markets, globalization efforts and enhanced digital capabilities, looks well-positioned to report decent sales results for this period, too. However, the rate of growth is expected to have remained sluggish amid a challenging supply environment in limited geographies. Further, the business is expected to have faced the hurdle of surging labor and raw material costs, as well as healthcare staffing shortages, which might have weighed on the bottom line in the third quarter.
(Read more: Will FARAPULSE Line Aid Boston Scientific's Q3 Earnings?)
The Zacks Consensus Estimate for third-quarter total revenues is pegged at $4.03 billion, suggesting an improvement of 14.4% from the prior-year quarter’s reported number.
The consensus mark for adjusted earnings stands at 58 cents per share, implying a 16% rise from the year-ago quarter’s reported figure.
During the third quarter, the company’s shares rose 9.7% compared with the industry’s 13% growth.
Per our proven model, a stock with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates. This is not the case, as you can see below.
BSX has an Earnings ESP of 0.00% and carries a Zacks Rank of 2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Boston Scientific Corporation Price and EPS Surprise
Boston Scientific Corporation price-eps-surprise | Boston Scientific Corporation Quote
Thermo Fisher: Within the Life-Science Solutions segment, the company is likely to have experienced a sales decline due to the runoff of pandemic-related revenues. The bioproduction business has likely grown in the third quarter, banking on strong adoption in the pharma and biotech segment. Within this business, in the second quarter, the company introduced a first-of-its-kind bio-based film for single-use technologies. These new bioprocess containers use plant-based materials rather than fossil fuel materials to provide lower-carbon solutions for biologics manufacturers.
(Read more: Robust Analytical Instrument Segment Likely to Aid TMO's Q3 Earnings)
The Zacks Consensus Estimate for revenues is pegged at $10.64 billion, suggesting 0.6% growth from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at $5.25 per share, indicating a 7.7% decline from the year-ago quarter’s reported numbers.
During the third quarter, the stock rose 14.2% compared with the industry’s 5.9% gain.
TMO has an Earnings ESP of +0.57% and carries Zacks Rank #3.
Thermo Fisher Scientific Inc. Price and EPS Surprise
Thermo Fisher Scientific Inc. price-eps-surprise | Thermo Fisher Scientific Inc. Quote
Align Technology: Similar to the last reported quarter, Align Technology is likely to have witnessed strength in Clear Aligner volumes for teens and adult patients. It is also expected to have registered continued growth from Invisalign Doctor Subscription Program (DSP) touch-up cases. On the second-quarterearnings call the company stated that it expects to expand DSP into other countries in Europe soon. If successfully executed, this too might have favorably contributed to ALGN’s Clear Aligner business in the quarter under review.
(Read more: ALGN Gears Up for Q3 Earnings: What Lies Ahead for the Stock?)
The Zacks Consensus Estimate for revenues is pegged at $989.9 million, suggesting growth of 3.1% from the year-ago reported figure. The Zacks Consensus Estimate for earnings is pinned at $2.31 per share, indicating a 7.9% improvement from the year-ago recorded actuals.
Meanwhile, during the third quarter, shares of the company increased 6.6% compared with the industry’s 1% growth.
Align Technology has an Earnings ESP of +2.84% and carries a Zacks Rank #4 (Sell).
Align Technology, Inc. Price and EPS Surprise
Align Technology, Inc. price-eps-surprise | Align Technology, Inc. Quote
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