We are in the thick of the earnings season with more than 64.2% of the index’s total market capitalization having already released their quarterly numbers. Meanwhile, in the MedTech space, uncertainty related to the Trump administration’s Obamacare repeal & replacement effort continues to make headlines. The latest uproar is related to the President’s newly-released executive order, designed to provide affordable quality healthcare to the nation.
Let us now have a quick look at how the medical device space has fared so far in the reporting cycle.
Q3 Performance
Various reports suggest that hurricanes at the end of the third quarter are likely to mar revenues and earnings of several MedTech companies, primarily in Florida, Texas and Puerto Rico. MedTech major Ecolab (ECL – Free Report) expects the impact of the hurricanes on full-year sales and costs to be approximately 8 cents per share. In fact, Medtronic (MDT – Free Report) acknowledged the impact of the Hurricane Maria on its quarterly metrics. The company expects almost $250 million impact on revenues and earnings.
The overall lack of visibility befuddles the favorable trend of the past few quarters in the broader Medical sector (one of the 16 Zacks sectors). Per the latest Earnings Preview, the third-quarter expected earnings growth rate for the sector is 5.2% on 4.8% revenue growth. In comparison, the reported earnings growth rate of second-quarter 2017 was quite impressive at 7% on 4.4% revenue growth.
To note, there are some powerful long-term tailwinds in the medical space, including mergers & acquisitions (M&A), emerging market expansion, positive demographic trends and new product innovation. These have been a major driving force behind the sector’s impressive performance over the past few quarters even amid severe socio-economic and political instabilities.
How to Make the Right Pick?
With the existence of a number of industry players, finding the right stocks that have the potential to beat earnings could be a daunting task. Our proprietary methodology makes it fairly simple for you. You could narrow down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.
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