Medical Device Stocks Earnings Due on Feb 1: BSX, BAX & More

The fourth-quarter 2017 earnings season is gaining momentum with 133 S&P 500 participants having already released financial numbers as of Jan 26. Per the latest Earnings Preview, the reporting cycle was off to an encouraging start with above-average proportion of companies edging past the top and bottom-line expectations.

Total earnings for these members have improved 11.6% on 6% increase in revenues.

With results of roughly 121 members slated to be announced this week, per the Zacks data, estimates for the period are gradually trending upward across the board for nine of the 16 Zacks sectors. The Medical as one in the bracket, is expected to witness a 2.1% earnings rise in the fourth quarter on 2% revenue growth projection.

What’s in Store for Medical Device Industry?

The medical device space within the broader Medical sector somewhat displays a mixed bag of sorts. As part of the tax overhaul, corporate tax rates have been slashed down to 21% from the previous 35%, thus lending a huge relief to the MedTech mammoths.

However, ahead of the industry’s fourth-quarter earnings release, a section of analysts expect this new tax law to negatively impact the industry due to a possible cut in overall Medicare spending, if certain criteria are not fulfilled by a specific date. The Congressional Budget Office apprehends that in absence of any alternative to meet the fiscal deficit from the huge tax reduction, automatic cut backs worth $136 billion including $25 billion in Medicare cuts from the mandatory budget of spending in 2018, could be triggered.

Amid tax reform related concerns, the news of Congress delaying the medical device tax for another two years came as a huge boost to industry players and investors. This 2.3% tax was earlier delayed by Congress in 2015 for a couple of years. The deferral will once again largely propel R&D activities within this space.

Let’s take a sneak peek at the performance of five major medical device companies, waiting to report earnings on Feb 1.

Boston Scientific Corporation BSX: We are optimistic about the company’s gradually improving performance in Interventional Cardiology, led by an innovative portfolio and robust commercial teams, globally. More specifically, The WATCHMAN platform is expected to experience another excellent quarter on consistent global momentum as Boston Scientific’s multiple market development efforts continue to push for growth.

The company has a positive Earnings ESP of +1.07% and a Zacks Rank #3 (Hold). While a favorable Zacks ESP indicates a likely positive surprise, a bullish Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the predictive power of ESP.

Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

(Read More: Will WATCHMAN Boost Boston Scientific's Q4 Earnings?)

Baxter International Inc. BAX: In the fourth quarter of 2017, Baxter International is anticipated to gain from strong Hospital Products, driven by solid sales in the U.S. Fluid Systems business as well as robust demand for injectable pharmaceuticals. Within the Hospital Products segment, we expect Fluid Systems to maintain the momentum, evident from the Zacks Consensus Estimate of $634 million for the to-be-reported quarter, which reflects a 3.3% improvement from the year-ago period.

Banking on solid prospects, our quantitative model also shows a beat for the company, given the combination of a Zacks Rank of 3 and an Earnings ESP of +1.28%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

(Read more: Can Baxter Beat Q4 Earnings on Hospital Products?).

McKesson Corporation MCK: This major player in the pharmaceutical and medical supplies distribution market expects to witness a solid performance in its Canadian business in the third quarter of fiscal 2018. Also McKesson Specialty Health unit is likely to drive the company’s top line in the same time frame. The unit is likely to benefit from the closing of the intraFUSION acquisition and the recent BDI Pharma buyout.

We are unable to conclude whether McKesson is likely to beat on earnings this quarter. The stock carries a Zacks Rank #2, which increases the predictive power of ESP and an Earnings ESP of -0.66%. However, we need to have a positive ESP to be confident about an earnings surprise. You can see the complete list of today’s Zacks #1 Rank stocks here.

(Read More: Mckesson to Report Q3 Earnings: A Beat in the Cards?)

Edwards Lifesciences Corporation EW: This leading cardiovascular product maker is expected to grow on robust Transcatheter Heart Valve Therapy segment in the fourth quarter of 2017. On the back of a continued therapy adoption across all geographies, with notable strength in the United States, the company is likely to retain its bullish run in the period to be reported.

Edwards Lifesciences is a Zacks #3 Ranked player and has an Earnings ESP of +1.29%. While a positive Zacks ESP denotes a likely earnings surprise, a favorable Zacks Rank of the company raises the predictive power of ESP.

(Read More: Edwards Lifesciences' THVT Likely to Drive Q4 Earnings)

IDEXX Laboratories, Inc. IDXX: Repeating its preceding quarter’s success as if, IDEXX is estimated to gain from a strong global footprint in Companion Animal Group Diagnostics with recurring revenues in the fourth quarter. We are also upbeat about IDEXX enhancing its commercial capabilities in the United States to maintain recurring revenue growth at CAG Diagnostics.

The company is a #3 Ranked player but has an Earnings ESP of -0.23%. Therefore, we are unable to conclude whether IDEXX is likely to beat on earnings this quarter. However, IDEXX’s trailing 12-month average beat is 9.35%.

(Read More: Can IDEXX Post a Beat in Q4 Earnings on CAG Strength?)

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