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Medical Product Stocks' Earnings Due on May 1: CAH & OCPNY

The first quarter has put up quite an impressive show so far, with 181 members in the S&P 500 cohort having reported their results. Per our latest Earnings Preview, first-quarter earnings for the S&P 500 companies are expected to be up 9.7% from the year-ago quarter on 5.9% growth in revenues.

Medical, one of the broader sectors among the 16 Zacks sectors, is expected to record earnings growth in the quarter. So far, 22.6% of the members from this sector posted impressive earnings and revenue beats of an average of 72.6% and 51.6%, respectively.

With the majority of bigwigs yet to report their results, the next week will be crucial in deciding whether this quarter will turn out to be a real game changer for the sector. At the end of the quarter, the sector is anticipated to witness 0.8% earnings growth on the back of 6.3% higher revenues.

Medical Product Sector amid Political Uncertainties

The recent political conundrum pertaining to the failure of the Republicans to repeal Obamacare has raised uncertainties in this space. Recently, Republicans proposed new amendments in which the government would set aside $15 billion as a ‘risk-sharing’ program to provide payments to health insurers for individual claims. We believe the sharing of the cost burden will be a prudent move to avail medical products and services at pocket-friendly costs.

In fact, the promising approach of the new ‘Trump-care’ regime (if brought into being) would immediately result in broadening of customer base for the Medical Product companies, who could have otherwise suffered owing to their exorbitant products and services.

But the old template of the ‘Trump-care’, which promised to eradicate the infamous 2.3% medical device tax and the Cadillac tax (40% excise tax on high-cost healthcare plans) was not a bad deal as well.

Amid such a volatile backdrop, the question that arises at the moment is how the Medical Product players stand to gain or lose from this earnings season.

Sector at a Glance

The medical product sector shines bright at the moment. This is because the sector gained almost 10%, comparing favorably with the S&P 500’s addition of just 4.8%.

Notably, the growth story in the space exclusively pertains to the market dynamics and the shift in consumer demand, courtesy of the growing prevalence of minimally invasive surgeries, liquid biopsy tests, and use of IT for ensuring quick and improved patient care among other things. Furthermore, cost-effective products and techniques targeting emerging markets raise optimism.

Let’s take a look at two major Medical Product bigwigs, which are expected to release their earnings results on May 1:

Cardinal Health, Inc. CAH– This Dublin, OH-based global player in the healthcare services and products space is set to report third-quarter fiscal 2017 results, before the bell.

Last quarter, the company posted earnings of $1.34 per share, which surpassed the Zacks Consensus Estimate by 10 cents. Notably, on average, Cardinal Health beat the Zacks Consensus Estimate by almost 4.74% over the last four quarters.

Cardinal Health, Inc. Price and EPS Surprise

 

Cardinal Health, Inc. Price and EPS Surprise | Cardinal Health, Inc. Quote

Cardinal Health is banking on acquisitions, strategic buyouts, joint ventures and supply agreements to drive growth. Furthermore, growth in new and existing customer count is likely to boost earnings. The company expects its fiscal 2017 adjusted earnings per share from continuing operations in the range of $5.35 to $5.50. The outlook represents growth of approximately 2% to 5%, signifying probabilities of outperformance in this quarter also (read more: Can Cardinal Health Bring On a Beat in Q3 Earnings?).

Despite the strong prospects, our quantitative model does not conclusively show a beat for the company, given the combination of a Zacks Rank #4 and an Earnings ESP of 0.00%. That is because, as per our model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings. Simultaneously, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Olympus Corporation OCPNY – Headquartered in Tokyo, Japan, Olympus Corporation manufactures and sells precision machineries and instruments worldwide. The company is expected to release its fourth-quarter fiscal 2017 results.

The company has a long-term expected earnings growth rate of 6.46%, with considerable promise for the long haul.

Olympus Corp. Price and EPS Surprise

 

Olympus Corp. Price and EPS Surprise | Olympus Corp. Quote

However, our proven model does not predict an earnings beat for the company this season, thanks to its Earnings ESP of 0.00% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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