Medical Product Stocks' Earnings On Aug 9: PEN, STE & More

The second-quarter earnings season is in its last lap with more than 87% of the S&P members having already released results. This is a decisive point which directs the quarter’s trend and sets the tone for the future. We have already seen how the results so far have demonstrated a definite improvement from what we had experienced in the last couple of quarters.

Although the season has not succeeded in breaking the trend of an earnings decline experienced in the trailing four quarters, the degree of loss is certainly narrowing. This boosts our optimism and makes us believe that a change in trend is in the cards before the year is out. As per the latest Earnings Preview report, the scorecard has so far exhibited a 4.1% year-over-year decline in second-quarter earnings on 0.9% lower revenues.

Medical, one of the 16 broader Zacks sectors, has been a standout performer since the beginning of the season. As per the latest scorecard, the earnings growth rate is at an impressive 6.5% year over year on account of a 9.9% rise in revenues. For the remainder of the season, earnings are anticipated to rise 4.4%, driven by an impressive top-line growth expectation of 7.7% in this sector.

What’s in Store for the Med-Product Space?

Medical product, a niche area under the medical device subcategory within the broader Medical sector, holds a lot of potential at the moment. The temporary two-year suspension of the controversial and dreadful 2.3% medical device excise tax, which took a toll on the entire MedTech industry since its enforcement in 2013, has brought in a much needed respite for this sector. Moreover, recent changes in consumer demand and market dynamics have led to a dramatic transformation in the entire healthcare system. This is evident from the growing prevalence of minimally invasive surgeries, rising demand for liquid biopsy tests, use of IT for ensuring quick and improved patient care along with the shift of the payment system to a value-based model.

Let’s take a look at the major medical product stocks slated to release their quarterly reports on Aug 9:

Penumbra, Inc. (NYSE:PEN)

This global interventional therapies company that went public on Sep 17, 2015, is scheduled to report second-quarter 2016 financial numbers on Aug 9, after the closing bell. We are encouraged by the steadily increasing demand for treatment options in the heart diseases market which reflects high growth potential for the company in this category. Lucrative growth opportunities exist in the ischemic stroke market as well as in more established markets like hemorrhagic stroke and peripheral vascular.

However, our proven model does not conclusively show that Penumbra is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as Penumbra currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%. However, we note that the company’s trailing 12-month earnings surprise is 133.6%.

(Read More: Penumbra to Report Q2 Earnings: What's in the Cards?)

Steris Plc (NYSE:STE)

Headquartered in Ohio, Streris works on infection prevention, decontamination, microbial reduction along with surgical and gastrointestinal support products and services. The company’s latest Synergy Health buyout is expected to enhance Steris' presence in the global markets combining Steris' strong presence in North America with Synergy's solid footprint across Europe. However, the declining cash flow balance is concerning.

The stock, which is scheduled to release first-quarter 2017 financial numbers on Aug 9, currently bears an unfavorable Zacks Rank #4 (Sell) and has an Earnings ESP of -3.85%. We observe that the company’s earnings missed the Zacks Consensus Estimate in the last reported quarter by 10.89% However, the trailing four-quarter average earnings surprise is a positive 1.485%.

Omeros Corporation (NASDAQ:OMER)

This medical product company is a biopharmaceutical manufacturer and marketer of small-molecule and protein therapeutics, along with orphan indications targeting inflammation, coagulopathies, and disorders of the central nervous system.

The company is scheduled to report second-quarter 2016 earnings on Aug 9. While a favorable Zacks Rank #3 increases the predictive power of the ESP, an ESP of 0.00% makes a surprise prediction uncertain. We also note that in the last reported quarter, the company registered an earnings beat of 16%. The trailing 12-month average surprise is a positive 11.52%.

NantHealth, Inc. (NASDAQ:NH)

This is a transformational healthcare cloud-based IT company offering cloud-based platform solutions providing actionable health information at the point of care for critical illnesses. The company is slated to report second-quarter 2016 earnings on Aug 9. The company currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%.

Eagle Pharmaceuticals Inc. (NASDAQ:EGRX)

This specialty pharmaceutical company works on injectable products primarily catering to the critical care and oncology areas. The company is scheduled to report second-quarter 2016 earnings on Aug 9.

Currently, Eagle Pharmaceuticals carries a Zacks Rank #5 (Strong Sell) and has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 68 cents per share. However, last quarter, the company reported a positive earnings surprise of 81.25%.