The fourth quarter reporting cycle has just started for the Medical (one of the 16 major Zacks sectors within the Zacks Industry classification), and quarterly performance has been flat so far. According to the latest trends, the earnings growth of the medical sector is expected to be one of the strongest among the seven best performing sectors.
By the last Revenue overview, 8.9% of companies in the medical sector, accounting for nearly 29.2% of the market capitalization of the sector, reported profits through January 26. Profits were up 27% year over year on revenue up 12.2%. A total of 40% of corporate earnings and revenue exceeded Zacks’ consensus estimate.
Although the scorecard so far reflects stable market conditions in the United States, earnings estimates for the fourth quarter point to a sequential decline. Overall, fourth-quarter profits for the medical sector are expected to rise 18.4% on a 12.2% increase in sales. That compares to third-quarter earnings growth of 29.7% on reported revenue growth of 15.7%.
Medical Devices Quarterly Synopsis
An integral part of the broader medical industry, the collective business growth of Zacks-defined medical device or medical product companies is expected to have improved from last quarter’s pandemic-induced challenges. However, rising cases of Omicron and continued supply chain constraints are causing apprehensions.
The dynamic nature of the COVID-19 crisis has transformed the landscape of the medical products industry over the past few months. Companies in this space saw a sharp sequential decline in their legacy core businesses during the third quarter reporting cycle. However, a significant increase in vaccination campaigns has helped people gradually return to pre-pandemic normality. This, in turn, has likely resulted in some recovery in hospital visits and hospital activity in the current reporting cycle, which should in turn boost non-COVID and elective industry legacy activity. medical. Although companies are seeing a sequential recovery in their core business, the improvement in the overall trend is still below pre-COVID levels.
Despite the recent resurgence of infections (weighing on hospital settings) which may have impacted elective proceedings to some degree, the Biden administration’s push for vaccination mandates and the growing availability of home testing kits to contain the pandemic are likely to have spurred diagnostic space.
Specifically, in the fourth quarter, Abbott Laboratories‘ABT’s underlying legacy diagnostic activity continued to improve. This was due to strong sales of ABT’s COVID-19 tests thanks to strong demand for the BinaxNOW, Panbio and ID NOW rapid test platforms.
In addition, sales of Abbott’s rapid diagnostics and point-of-care diagnostics both grew organically.
On the other hand, Pacific Biosciences of California, Inc. PACB, popularly known as PacBio (not involved in diagnostics), recently announced preliminary financial results for the fourth quarter of 2021, where it expects solid year-over-year improvement in quarterly revenue .
Although not actively involved in COVID-19 related products, PACB has launched a COVID-19 monitoring solution, HiFi Viral, which is the company’s first in-kit sequencing solution. The company has also made notable progress in the development of its short-read sequencing platform by applying a new clustering method to facilitate a more robust workflow.
Let’s take a look at four medical device players who are due to announce their results on February 2.
IDEXX Laboratories, Inc. IDXX: IDEXX’s Companion Animal Group (“CAG”) business is expected to benefit from steady and healthy organic revenue growth in the fourth quarter, supported by a strong performance from CAG Diagnostics’ recurring business in the U.S. and ‘international. Robust growth in clinical activity in the United States likely contributed to recurring revenue gains from US CAG Diagnostics. The acquisition of ezyVet, completed in June 2021, expanded IDEXX’s cloud-based software capability and should have fueled growth in the CAG business. That aside, the company’s veterinary and diagnostic software businesses are also expected to see strong growth in the fourth quarter thanks to gains in PIMS placements and continued strong growth in related recurring services, similar to the prior quarter. first benefits from the recent acquisition of ezyVet. . (Read more: IDEXX to Release Fourth Quarter Earnings: What’s in the Cards?)
IDEXX Laboratories, Inc. Award and EPS Surprise
IDEXX Laboratories, Inc. price-eps-surprise | IDEXX Laboratories, Inc. Quote
Zacks’ consensus estimate for fourth-quarter earnings is set at $1.67 per share. Revenue is expected to be $780.3 million.
IDEXX doesn’t have the right combination of the two key ingredients – a positive ESP Earnings and a Zacks rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) – which increases the odds of beating gains. IDXX has an earnings ESP of 0.00% and a Zacks rank #4 (sell). You can discover the best stocks to buy or sell before they’re flagged with our Income ESP Filter.
AmerisourceBergen Corporation ABC: AmerisourceBergen’s continued growth in specialty product sales (including COVID-19 treatments), as well as overall market growth, in its U.S. healthcare solutions segment, may have be benefited to its performance in the first quarter of 2022. Apart from this, the World Courier unit is expected to have shown strong performance in the soon to be released quarter. During the fourth fiscal quarter of 2021, the company continued to provide highly specialized logistics around the world despite the challenging global logistics environment, while driving innovation with in-home clinical trials. This trend should also have continued during the first fiscal quarter. (Read more: AmerisourceBergen to Report First Quarter Results: What’s in Store?)
AmerisourceBergen Corporation Award and EPS Surprise
AmerisourceBergen Corporation price-eps-surprise | Quote from AmerisourceBergen Corporation
The Zacks consensus estimate for AmerisourceBergen’s fiscal first quarter earnings is set at $2.59 per share. Revenue is expected to be $59.42 billion.
ABC has an ESP on Earnings of -0.91% and a #3 Zacks Rank.
Align Technology, Inc. ALGN: Align Technology has seen increased use of Invisalign clear aligners and continued adoption of iTero scanners over the past few quarters. This momentum likely continued through the fourth quarter of 2021 on the heels of the reopening of practices and growing physician acceptance of the Align digital platform. The company saw substantial growth in Invisalign volumes in the adolescent segment, driven by increased Invisalign usage and case submissions by Invisalign physicians. We believe this will have a full quarter contribution to fourth quarter revenue. The growing use of the My Invisalign app and virtual care feature has likely further driven Invisalign adoption, leading to improved sales. (Read more: Aligning Technology to Release Fourth Quarter Results: What’s in Store?)
Align Technology, Inc. EPS Awards and Surprise
Align Technology, Inc. price-eps-surprise | Align Technology, Inc. Quote
Zacks’ consensus estimate for Align Technology’s fourth quarter earnings is set at $2.67 per share. Revenue is expected to be $1.02 billion.
ALGN has an ESP of 0.00% and a Zacks Rank #4.
Stay up to date with upcoming results announcements with the Zacks Earnings Schedule.
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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.