Going by the earnings picture so far, it’s quite apparent that the Medical sector has been more resilient to the COVID-19 induced economic volatility compared to the other sectors. So far, the companies that have already reported their third-quarter 2020 results have displayed signs of recovery when compared to the second quarter that bore the brunt of the pandemic.
Following the easing of restrictions, most of the Medical Products companies (integral to the broader Medical sector) seems to have experienced business growth on the back of month-wise rebound in sales volumes. Additionally, significant market adoption of COVID-19 related healthcare offerings and investment in the advancement of digital health and remote consultation technologies have contributed to the third-quarter 2020 results.
Per the latest Earnings Preview, this sector’s scorecard so far reflects 8% earnings growth on 12.1% improvement in revenues. Overall, earnings are projected to increase 8% (Q2 reported growth was 4.7%) on 10.2% revenue growth (growth of 3.1% in Q2).
As COVID-19 related developments continue to generate revenues, the companies involved in diagnostic testing and medical device makers have been reaping the benefit of the present healthcare scenario and are expected to have made substantial profits in the third quarter. In fact, Abbott Laboratories (NYSE:ABT) ABT have shown significant improvements when it comes to diagnostic testing to combat the COVID-19 pandemic. In the third-quarter 2020 results, the company’s diagnostic sales were up 38.2%, year over year on a reported basis (up 38.8% on an organic basis) to $2.64 billion. Core Laboratory (NYSE:LH) Diagnostics sales were up 0.8% on an organic basis. Molecular Diagnostics soared 313.6% on an organic basis. Rapid Diagnostics sales improved 83% on an organic basis in the September-end quarter.
Also, remote consultation technologies, which falls under the scope of digital health, might have continued to benefit third-quarter performance of the companies deeply involved in this space.
Deferral of elective procedures weighed on the performance of most companies in the first half of the year. However, with the slow resumption of the same, companies in this space may have gained from it. Plus, emergency healthcare support (companies offering renal care, cardiovascular support, oncology support and diabetes management products) are expected to have maintained their usual growth trend despite slight disruption.
However, some of the companies, especially those with a substantial international base witnessed a notable reduction in product demand across their core business segments and geographies in third quarter.
Zacks Methodology
Given the high degree of diversity in the Medical Products industry, finding the right stocks with the potential to beat estimates might be quite a daunting task.
However, our proprietary Zacks methodology makes this fairly simple.
We are focusing on stocks that have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Our research shows that for stocks with this combination, chances of an earnings surprise are as high as 70%.
Earnings ESP provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here we present three stocks that are expected to beat earnings estimates in this reporting cycle.
Zimmer Biomet Holdings (NYSE:ZBH), Inc. ZBH: Despite noticeable decline in sales in second-quarter 2020 due to the pandemic, Zimmer Biomet witnessed a rapid recovery in May and June, which continued into July even amid the resurgence in COVID-19 cases. Slow resumption of elective procedures is likely to boost this recovery, which in turn might get reflected in the company’s third-quarter 2020 results.
The combination of Zimmer Biomet’s Earnings ESP of +4.10% and a Zacks Rank #3 raises the possibility of an earnings surprise in the to-be-reported quarter.
The company is scheduled to release third-quarter 2020 results on Nov 6, before the opening bell.
Canopy Growth (NYSE:CGC) Corporation CGC: The reopening of Canopy Growth’s corporate-owned retail stores is likley to get reflected in second-quarter fiscal 2021 results.
The company is set to release quarterly results on Nov 12, before the opening bell.
Canopy Growth has an Earnings ESP of +7.55% and a Zacks Rank #3.
Medtronic (NYSE:MDT) plc MDT: Rising worldwide demand to meet the COVID-19 related patient needs has led to Medtronic significantly ramping up its ventilator production. This, in turn, is likely to have benefited the company’s fiscal second-quarter 2021 performance.
The company is set to release quarterly results on Nov 24, before the opening bell.
Medtronic has an Earnings ESP of +0.97% and a Zacks Rank #3.
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Medtronic PLC (MDT): Free Stock Analysis Report
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