The Zacks Analyst Blog Highlights McKesson, AmerisourceBergen, LHC Group and Glaukos

For Immediate Release

Chicago, IL – August 3, 2022 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: McKesson MCK, AmerisourceBergen ABC, LHC Group LHCG and Glaukos GKOS.

Here are highlights from Tuesday’s Analyst Blog:

Medical Device Stocks’ Earnings on Aug 3: MCK, ABC & More

For the Medical sector (one of the 16 broad Zacks sectors within the Zacks Industry classification), the reporting cycle so far has been impressive. The quarterly performance of the majority of medical product stocks has shown accelerated base business growth through the months of the second quarter of 2022 over comparable 2021 numbers, given the drop in severity of COVID-19 infections (despite the emergence of new virus variants). Per the latest trends, the Medical sector’s revenue growth is expected to be one of the strongest among the nine top-performing sectors. However, continued supply chain challenges have been hurting margins and the trend is likely to have continued during the second quarter of 2022. This in turn is likely to have led to lower earnings growth for Medical sector stocks.

Per the latest Earnings Preview, 25% of the companies in the Medical sector, constituting nearly 41.2% of the sector’s market capitalization, have already reported earnings numbers. Earnings increased 5.1% year over year on 10.7% higher revenues. A total of 78.6% of the companies’ earnings as well as revenues beat the Zacks Consensus Estimate.

The scorecard so far reflects stable market conditions within the United States on the gradual reopening of the economy even amid the rise of the new variant-led COVID-19 cases through the past few months. Overall, second-quarter earnings for the Medical sector are expected to rise 1.1% on 7.9% sales increase compared with first-quarter 2022 earnings growth of 16.7% on 15.6% reported revenue growth.

Medical Device Quarterly Synopsis

Integral to the broader Medical sector, the Medical Device companies’ collective business growth is likely to have improved from the year-ago quarter’s pandemic-induced challenges. The Medical Device companies saw a recovery in demand for their base or legacy businesses during the first quarter, which is likely to have continued in the second quarter of 2022. However, the continued emergence of more contagious COVID-19 variants in both the domestic and international markets is raising apprehensions. Adding to the woes are the ongoing staffing shortages and supply chain constraints, which are plaguing the broader Medical sector. The companies are putting in consistent efforts to mitigate staffing shortages.

Meanwhile, these companies continue to face a shortage of semiconductor chips globally. The chips are used in the manufacturing of life-saving medical equipment. This ongoing challenge is expected to have significantly hampered performance across several businesses in the Medical Device industry in Q2.

Overall, the rebound in the base business through the months of the second quarter is expected to have been impressive. Medical Device companies like McKesson, AmerisourceBergen, LHC Group and Glaukos are likely to have been positively influenced by these factors in the to-be-reported quarter, despite continuing challenges on the macroeconomic front.

Let’s take a look at four Medical Device players scheduled to announce results on Aug 3.

McKesson: The company’s fiscal first-quarter results are likely to reflect segmental strength. Its Pharmaceutical and Specialty Solutions segment is likely to have been a key driver for the top line on the back of market growth and higher volumes in the United States. Growth and improvement in the primary care business is likely to have boosted Medical-Surgical solutions segment. ((Read more: McKesson to Report Q1 Earnings: What’s in the Cards?)

The Zacks Consensus Estimate for total revenues of $63.87 billion for the fiscal first quarter suggests 1.9% growth from the prior-year quarter’s reported figure. The consensus mark for MCK’s earnings of $5.31 per share indicates a 4.5% decline from the year-ago quarter’s reported figure.

Per our proven model, a stock with the 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 with MCK, as you can see below.

MCK has an Earnings ESP of -0.41% and carries a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

AmerisourceBergen: The company’s US Healthcare Solutions segment is likely to have been driven by sustained growth in specialty product sales, including COVID-19 treatments, during the fiscal third quarter. ABC’s another segment, the World Courier unit is also likely to have continued its impressive track record during the soon-to-be reported quarter. (Read more: Is a Beat Likely for Amerisource Bergen in Q3 Earnings?)

The Zacks Consensus Estimate for ABC’s fiscal third-quarter earnings of $2.57 per share implies 18.98% growth from the year-ago reported figure. The consensus estimate for revenues is pegged at $58.91 billion, suggesting a 10.31% rise from the prior-year reported number.

ABC has an Earnings ESP of +2.16% and a Zacks Rank #3.

LHC Group: The company reported strong organic growth in revenues during the first quarter driven by hospice services. The trend is likely to have continued in the second quarter. Home health service revenues are also likely to have maintained their organic growth record from the last reported quarter, benefiting the company’s top line further. The impact of the joint venture with Archbold Medical Center in May for in-home services remains to be seen. However, gross and operating margins are likely to have been hurt during the soon-to-be reported quarter.

The Zacks Consensus Estimate for LHC Group’s second-quarter revenues is pegged at $602.96 million, which implies growth of 10.45% from the year-ago figure. The consensus estimate for earnings per share is pegged at $1.32, suggesting a fall of 18.52% from the prior-year reported figure.

LHCG has an Earnings ESP of 0.00% and a Zacks Rank #4.

Glaukos: Despite continued pandemic-induced volatility and global headwinds, the company’s global glaucoma and Corneal Health franchises reflected solid execution during the first quarter. Moreover, improvement in the gross margin is likely to have continued in the second quarter. However, ongoing research and development activities are likely to have led to higher operating expenses in the soon-to-be-reported quarter. Analysts will likely ask questions related to the potential launch of iStent infinite, which is under review with the FDA, on the earnings call.

The Zacks Consensus Estimate for Glaukos’ second-quarter revenues is pegged at $67.61 million, which implies a fall of 13.42% from the year-ago figure. The consensus estimate for loss per share is pegged at 44 cents, suggesting a fall of 300% from the prior-year reported figure.

GKOS has an Earnings ESP of 0.00% and a Zacks Rank #2.

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

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