MedTech Stocks Q1 Earnings: Key Predictions For DGX, MD, CHE

The first-quarter earnings season is in its nascent stage with a handful of S&P 500 participants having released results so far. Per the latest Earnings Preview, a bullish run is expected for the ongoing reporting cycle. Till Apr 16, 56 S&P 500 members reported their financial numbers.

Total earnings for the companies are expected to increase at a highly impressive 16.6% rate on a year-over-year basis, thereby marking an improvement from last quarter’s reported growth of 13.4%. However, total revenues for the same set of companies are projected to grow 7.5%, a decline from an 8.6% year-over-year rise in the fourth quarter of 2017.

With the current earnings season gradually picking up its pace, this week seems to roll out a busy roster. Per the Zacks report, 14 of the 16 Zacks sectors will likely register a year-over-year bottom-line improvement this quarter.

Healthcare at a Glance

One of those mentioned above is the Medical sector, wherein earnings are anticipated to increase 7.8% on a year-over-year basis. Notably, the year 2018 has provided ample reasons for the entire U.S. healthcare spectrum to cheer from the standpoint of the latest Tax Cuts and Jobs Act, which was finally signed by President Donald Trump on Dec 22. Among many other changes, corporate tax rates were slashed to 21% from the earlier 35%. This apart, the new legislation has almost doubled the standard deduction.

Why is the MedTech Fraternity Happy?

While the broader healthcare sphere is content with these huge tax reductions, the scenario within the Medical Device space, which is integral to healthcare, appears equally bright, courtesy of the Senate’s decision to defer implementing an industry-wide excise tax for another couple of years, known as the Medical Device tax.

Significantly, the tax will be effective Jan 1, 2020. The bill also delays the so-called Cadillac tax, a 40% tax on employer insurance, until 2022. The repealing of the tax paradigm is expected to boost hiring and investments among the 9,000 America-based medical device manufacturers, there instilling investors’ optimism in them.

Against this backdrop, eager investors await earnings reports of MedTech bigwigs throughout this week.

Let’s get a glimpse of the major Medical device stocks scheduled to release quarterly reports on Oct 26:

Per the quantitative Zacks model, stocks with the desirable combination of a solid Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP have higher chances of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Quest Diagnostics Inc. (NYSE:DGX) : Quest Diagnostics seems well-aligned with its two-point growth agenda to accelerate growth and drive operational excellence. Per its new long-term growth outlook (beyond 2017), revenue increase for the period 2017-2020 is likely to be 3-5% with 1-2% growth projected from acquisitions. Earnings for the period are anticipated to rise faster than revenues in the mid-to-high single digit range.

In this regard, we refer to two recent strategic M&As by Quest Diagnostics. Firstly, the Cleveland HeartLab acquisition should help leverage the company’s position in the New York metropolitan marketplace. Secondly, the buyout of Mobile Medical Examination Service MedXM should fortify Quest Diagnostics’ mobile provider capabilities and population health management solutions for health plans. These two transactions are predicted to reap favorable results in the yet-to-be-reported quarter.

Quest Diagnostics Incorporated Price and EPS Surprise

Quest Diagnostics Incorporated Price and EPS Surprise | Quest Diagnostics Incorporated Quote

Notably, the company’s earnings outpaced the Zacks Consensus Estimate by an average of 6.83% in the trailing four quarters. Further, the consensus mark for first-quarter earnings of $1.52 per share has remained unchanged over the last 30 days. The same for the company’s revenues is pegged at $1.90 billion, a 0.7% improvement from the year-ago figure.

Quest Diagnostics has an Earnings ESP of +0.57% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

(Will Buyouts Help Quest Diagnostics (DGX) Beat Q1 Earnings?)

MEDNAX Inc. (NYSE:MD) : This is a national health solutions partner based in Sunrise, Fl, comprising the nation's leading providers of physician services. Physicians and advanced practitioners from the stable of MEDNAX are reshaping the delivery of care within their specialties and subspecialties using evidence-based tools, continuous quality initiatives, clinical research and telemedicine to enhance patient outcomes plus providing high-quality, cost-effective care.

The Zacks Consensus Estimate for revenues of $903.7 million reflects an increase of 8.1% from the year-ago quarter. However, the company’s earnings underperformed the Zacks Consensus Estimate by an average of 2.24% in the last four quarters. MEDNAX has an Earnings ESP of +0.03% and a Zacks Rank #4 (Sell).

Chemed Corporation (NYSE:CHE) : Chemed’s VITAS business has been in trouble over the past few quarters due to certain admission coding changes initiated by the Centers for Medicare & Medicaid Services (CMS). However, management stated that although admissions were soft in 2016, the recent trends have been positive, indicating signs to carry on the momentum in the coming quarters.

Chemed Corporation Price and EPS Surprise

Chemed Corporation Price and EPS Surprise | Chemed Corporation Quote

Notably, the company’s earnings outshined the Zacks Consensus Estimate by an average of 6.47% in the preceding four quarters. While Chemed has an Earnings ESP of 0.00%, it carries a Zacks Rank #3.

The stock has seen the Zacks Consensus Estimate of $2.37 per share for first-quarter earnings, an improvement of a significant 30.2% from the prior-year tally. The estimate revision for the company’s revenues stands at $419.9 million, representing a 3.5% gain year over year.

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