MedTech Stocks' Earnings Due on Jul 27: BSX, HOLX & ALGN

The second-quarter earnings season for the Medical sector kicked off last week. The latest Earnings Preview reflects a strong year-over-year improvement in the quarterly performance so far this reporting cycle. Going by the sector’s scorecard, 8.9% of the companies in the Medical sector, constituting 29% of the sector’s market capitalization, reported earnings till Jul 22. Of these, 100% beat earnings estimates and 75% beat the same for revenues. Earnings increased 10.4% year over year on 11.2% higher revenues.

This scorecard reflects the ongoing stability in the United States on continued economic reopening. However, a number of players within this space have witnessed mounting raw material costs and other expense pressure through the Q2 months, all thanks to the global surge in the inflationary situation with oilprices peaking high. Added to this, the labor-supply constraints with rising labor costs and global supply-chain hazards are expected to have moderated the growth process.

Overall, second-quarter earnings of the Medical sector are expected to rise a mere 1.5% on an 8.1% sales increase. This compares with the first-quarter reported earnings growth of 16.7% and revenue growth of 15.6%. It is worth mentioning that the Medical sector is projected to be one of the 10 sectors expected to report earnings growth in this reporting cycle.

MedTech Quarterly Synopsys

Integral to the broader Medical sector, MedTech or the Zacks-defined Medical Productscompanies’ collective business growth is likely to have displayed improvement compared with the last year, with a significant reduction in COVID-led fatality across the United States and other developed countries. Through the Q2 months, the fourth wave of COVID-19 as well as monkeypox spread rapidly across various developed and emerging nations. Yet, the consistent opening up of the economy and the companies successfully addressing a couple of years’ pent-up demand are likely to have led to higher year-over-year growth within the legacy base businesses of the industry players.

Also, the second-quarter results of the diagnostic testing companies might have shown a sequential rise in testing demand, thanks to rising new cases, leading to impressive business growth for many companies.

Overall, the legacy base business recovery and testing demand of the companies through the months of the second quarter are expected to have been impressive. MedTech companies like Boston Scientific BSX, Hologic HOLX and Align Technology ALGN are likely to have been positively influenced by these factors in Q2.

However, as discussed earlier, replicating the market-wide trend, this sector’s Q2 results are likely to be significantly dampened by the ongoing recessionary threat in the United States and outside. Amid a potential recession and surging inflationary situation, when raw material and transportation costs kept mounting, the MedTech companies are expected to have curbed their expenses to control the margin pressure in Q2. This might have in a way shrunk the companies’ revenues in Q2 compared to the prior quarter.

Let's take a look at three MedTech players scheduled to announce results on Jul 27.

Boston Scientific: Boston Scientific’s Q2 top line is likely to have improved year over year with non-COVID elective medical procedures running in a full-fledged way in the United States and elsewhere across the globe. Given the improving scenario along with an innovative pipeline, expansion into faster growth markets, globalization efforts and enhanced digital capabilities, Boston Scientific is well-positioned to register strong second-quarter 2022 results. However, given the ongoing inflationary situation, the business is expected to have faced the hurdle of surging labor and raw material cost, which might have weighed on BSX’s bottom line in Q2.(Read more: What's in Store for Boston Scientific in Q2 Earnings?)

The Zacks Consensus Estimate for total revenues of $3.21 billion for the second quarter suggests a 4.5% rise from the prior-year quarter’s reported figure. The consensus mark for BSX’s earnings of 42 cents per share indicates a 5% rise from the year-ago quarter’s reported figure.

Per our proven model, a stock with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates. However, this is not the case as you can see below.

BSX has an Earnings ESP of -1.62% and carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Boston Scientific Corporation Price and EPS Surprise

Boston Scientific Corporation price-eps-surprise | Boston Scientific Corporation Quote

Hologic: Hologic’s Molecular Diagnostics business is likely to have gained from the growing adoption of Panther instruments in the third quarter of fiscal 2022.The continued uptake of its vaginitis panel within the virology product line is likely to have been advantageous for the company. The BV CVTV assay is anticipated to have maintained its rally in Q3. However, in recent months, the ongoing semiconductor chips shortage has aggravated due to the persistent supply chain issues and the current geopolitical environment. This is likely to have impacted Hologic’s Breast Health business as it did in the fiscal second quarter.  (Read more: Hologic to Report Q3 Earnings: What's in the Cards?)

The Zacks Consensus Estimate for Hologic’s fiscal third-quarter revenues is pegged at $896.2 million, which implies a decline of 23.3% from the year-ago figure. The consensus estimate for earnings per share is pegged at 69 cents, suggesting a fall of 48.1% from the prior-year reported figure.

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

Hologic, Inc. Price and EPS Surprise

Hologic, Inc. price-eps-surprise | Hologic, Inc. Quote

Align Technology: As the economies around the world returned to normalcy, amid COVID-19 concerns, we anticipate Invisalign case volumes to have rebounded across the Americas and international regions in Q2 for Align. However, the ongoing conflict in Ukraine and the heightened volatility in foreign exchange rates might have created hindrances to recovery, hampering business performance in Q2. (Read more: Align Technology to Post Q2 Earnings: What's in Store?)

The Zacks Consensus Estimate for second-quarter earnings of $2.21 per share implies a 27.3% plunge from the year-ago reported figure. The consensus estimate for revenues is pegged at $1.01 billion, suggesting a 0.5% fall from the prior-year reported number.

ALGN has an Earnings ESP of -6.34% and a Zacks Rank #5.

Align Technology, Inc. Price and EPS Surprise

Align Technology, Inc. price-eps-surprise | Align Technology, Inc. Quote

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Boston Scientific Corporation (BSX) : Free Stock Analysis Report
 
Align Technology, Inc. (ALGN) : Free Stock Analysis Report
 
Hologic, Inc. (HOLX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research