Medical Products' Nov 7 Earnings Roster: ABC, CAH & More

The Medical Products companies within the broader Medical sector have been performing impressively in spite of certain quarterly volatilities. In fact, the ongoing US-China trade war is likely to have impacted the third-quarter performance of the industry participants. Nonetheless, favorable growth in the emerging markets and benefits obtained from innovation are likely to get reflected in the industry players’ performance this earnings season.

Over the past few months, the medical device space has witnessed exceptional progress when it comes to innovation — R&D to be precise. Some of the path-breaking inventions such as wireless brain sensors, Bluetooth-enabled smart inhalers, artificial pancreas, human-brain pacemaker, precision medicine, among others, have helped the medical device space to grow significantly. Abbott (NYSE:ABT) registered strong top-line growth in the recently-reported third quarter, banking on regulatory approvals for MitraClip, Alinity and FreeStyle Libre line.

Strong demand in the emerging markets is likely to have bolstered the performance of the industry participants in this reporting cycle. According to a MedTech Dive report, as stated by Moody’s, the medical device makers are likely to exhibit mid-single-digit revenue growth fueled by product innovation across most of the companies and categories throughout 2019. Additionally, sales in emerging markets are expected to display a double-digit percentage rise over the same timeframe. Consequently, this trend is likely to get reflected in the performance of the industry players in this reporting cycle.

Backed by rising medical awareness and economic prosperity, emerging economies have been witnessing strong demand for the medical products. In fact, a geriatric population, relaxed regulations, cheap skilled labor, increasing wealth and the government focus on healthcare infrastructure make these markets attractive to the global medical device players. In this regard, Varian Medical (NYSE:VAR) has been leveraging its capability to treat cancer in emerging economies that are slightly under-equipped to address the prevalence of the same. According to a MedTech Dive report, in May 2019, Varian Medical strengthened presence in India by acquiring Cancer Treatment Services International for $283 million.

However, the U.S. Medical Products industry has been bearing the brunt of headwinds pertaining to the U.S.-China trade war. Per a Medical Imaging & Technology Alliance (MITA) survey, tariffs will cost the companies nearly $138 million every year. This is anticipated to get reflected in the third-quarter performance of the companies in this space.

The latest Earnings Preview anticipates the Medical sector to deliver positive earnings surprises this time around although a sequential decline can be seen. For the quarter under review, earnings growth rate is projected at 6.1% on 7.1% revenue growth, compared with second-quarter reported earnings growth of 9.8% on 6.6% revenue growth.

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Considering the above factors, we take a look at the following four Medical Products behemoths that are set to release quarterly results on Nov 7.

AmerisourceBergen Corporation (NYSE:ABC) : Increasing volume and expanding customer base at the Pharmaceutical Distribution segment are likely to have driven the fourth-quarter fiscal 2019 revenues. This segment serves healthcare providers in the pharmaceutical supply channel. Continued strength in Specialty Distribution, solid organic growth rates in the U.S. pharmaceutical market, and improving patient access to medical care are likely to get reflected in the to-be-reported quarter’s top line. This apart, the company is likely to have benefited from generics growth in the to-be-reported quarter. Further, new product launches are likely to have contributed to overall performance. (Read more: AmerisourceBergen to Post Q4 Earnings: What’s in Store?)

AmerisourceBergen has a Zacks Rank #3 and an Earnings ESP of +0.55%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardinal Health, Inc. (NYSE:CAH) : Cardinal Health’s Pharmaceutical segment is the second largest pharmaceutical distributor in the United States. Probable sales growth from pharmaceutical distribution and specialty customers is anticipated to get reflected in the Pharmaceutical segment’s first-quarter bottom line. Better-than-expected performance at this segment is likely to have driven the company’s first-quarter fiscal 2020 performance.

Cardinal Health’s Medical unit is likely to have contributed significantly to the overall third-quarter performance. In fact, the segment manufactures products such as single-use surgical drapes, gowns and apparel, exam and surgical gloves, which are anticipated to have driven sales in the to-be-reported quarter. (Read more: What’s in the Cards for Cardinal Health in Q1 Earnings?)

Cardinal Health has a Zacks Rank #3 and an Earnings ESP of +0.69%.

DENTSPLY SIRONA Inc. (NASDAQ:XRAY) : DENTSPLY SIRONA’s growth strategy focuses on product innovation, and research and development (R&D) focus, which is likely to get reflected in the top line in the third quarter. Apart from this, a solid track record of innovation and dedicated, passionate workforce is likely to have contributed to the third-quarter performance. The company’s CAD/CAM is a dental imaging platform and a major foundation in global dental markets. Product launches and innovation in this area are likely to have fueled CAD/CAM sales in the to-be-reported quarter and consequently the top line in the United States.

Execution of cost saving opportunities is likely to impact the bottom line in 2019, a trend that that is likely to get reflected in the third quarter. (Read more: What’s in Store for DENTSPLY SIRONA in Q3 Earnings?)

DENTSPLY SIRONA has a Zacks Rank of 2 and an Earnings ESP of 0.00%.

Penumbra, Inc. (NYSE:PEN) : Penumbra is an interventional therapies company. It designs, develops, manufactures and markets medical devices. The company's portfolio of products primarily addresses neuro and peripheral vascular medical conditions and clinical needs. Neuro products include Neurovascular Access, Neuron Access System, BENCHMARK Intracranial Access System, Penumbra System, 3D, Penumbra Coil 400, Penumbra SMART Coil and LIBERTY stent. Peripheral vascular products include Ruby Coil System, Penumbra Occlusion Device and Indigo System.

The Zacks Consensus Estimate for third-quarter 2019 revenues is pegged at $133.4 million, indicating growth of 19.3% from the year-ago reported figure. The same for earnings stands at 18 cents, suggesting an improvement of 5.9% from the year-ago quarter. In the preceding four quarters, the company outpaced the consensus mark, the average being 147.6%.

Penumbra has a Zacks Rank #3 and an Earnings ESP of 0.00%.

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