4 Medical Product Stocks Likely To Top Q2 Earnings Estimates

TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

The political gridlock over the Affordable Care Act or Obamacare has been making headlines in the MedTech space. Amid such political conundrum at the Capitol Hill, market watchers will be keeping a tab on the MedTech space.

Of the recent developments, the GOP failure at Senate to repeal Obamacare is likely to cause tremors in the political circles once the August recess has ended. This is evident with Vice President Pence throwing his hat in the ring, vowing to end the “ObamaCare nightmare” at the Tennessee GOP 2017 Statesmen's Dinner on Thursday. Plans are also afoot from GOP senators Lindsey Graham and Bill Cassidy to redirect money, currently spent on providing coverage through ObamaCare. Per the plans, the amount will be distributed among states to spend accordingly.

Amid such political conundrum at the Capitol Hill, market watchers will keep a tab on the Medical space. The fraternity worries whether the final ‘Trump-care plan’ will still include the MedTech tax repeal in its agenda. Meanwhile, the old template of the plan, 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. Amid such uproar, the question that emerges is how medical product players stand to gain or lose.

Q2 Performance

Notably, 84% of the total S&P 500 companies in the broader Medical sector have released their second-quarter results, as of Aug 4. With a beat ratio of 87.0%, total earnings for these companies improved 7.1% year over year. Revenues for these companies also came up with a beat ratio of 69.6%. In fact, this encouraging trend is likely to continue as the latest Earnings Preview suggests that stocks in the much sought-after S&P 500 Index will witness 10% bottom-line expansion this reporting cycle.

Further, there are some powerful long-term tailwinds in the medical space, including mergers & acquisitions (M&A), emerging market expansion, positive demographic trends and new product innovation. These have been a major driving force behind the sector’s impressive performance over the past few quarters even amid severe socio-economic and political instabilities. Rising interest rates and the strengthening of U.S. dollar continue to act as dampeners for this industry.  

How to Make the Right Pick?

With the existence of a number of industry players, finding the right stocks that have the potential to beat earnings could be a daunting task. Our proprietary methodology makes it fairly simple for you. You could narrow down the list of choices by looking at stocks that have the combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.

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