With the third-quarter earnings season in full swing, it's going to be a pivotal week for numerous firms within the medical device sector. The latest Earnings Preview report indicates strong earnings and revenue growth within the Medical sector. The projected top and bottom-line improvements can be attributed to sustained demand for medical products and services, and favorable pricing strategies, which are likely to offset the shortcomings generated from worldwide geopolitical issues, high-interest expense scenarios and healthcare labor shortages.

Going by the broader Medical sector’s scorecard, 13.8% of the companies in the Medical sector, constituting 32.6% of the sector’s market capitalization, reported earnings till Oct. 23. The bottom line dropped 1.3% year over year despite 7.3% higher revenues. Of the companies that have reported, 75% beat on both earnings and revenues.

Overall, third-quarter earnings of the Medical sector are expected to have improved 3.5% on 8.8% growth in revenues. This compares with the second-quarter earnings increase of 19.3% on revenue growth of 8.4%.

The bottom-line expectations for the third quarter disappoint when compared to the second-quarter performance, primarily due to the Middle East issues leading to an oil price crisis and supply disruptions. FX headwinds might have also aggravated during the third quarter.

Some major industry players like Zimmer Biomet ZBH, Bio-Rad Laboratories BIO and BioTechne Corp TECH are set to report their quarterly results tomorrow.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Factors Driving the Q3 MedTech Earnings Season

Replicating the broader market trend, MedTech or the Zacks-defined Medical Products companies are expected to report collective sales growth in the third quarter. The industry is currently experiencing rapid adoption of generative Artificial Intelligence (genAI) and digital therapies, which market observers predict will take the healthcare business by storm.

Macro trends that are setting the stage for even more innovation and investment in this space are an aging population, growing healthcare awareness and increasing access to better health options. Favorable impacts from these are expected to be seen in the third-quarter results.

Yet, the industry is now grappling with issues in the form of staffing shortages within the hospital systems. Further, the pandemic has exposed hospitals to a plethora of challenges, including a significant surge in medical supply expenses. These are putting significant pressure on the margins of medical device companies. Further, a worsening geopolitical environment leading to supply chain bottlenecks has resulted in high freight and raw material costs.

Also, diagnostic testing companies have been witnessing a severe year-over-year decline in testing demand for COVID-19 testing products.

MedTech Stocks to Watch

Zimmer Biomet: It is likely to have experienced strong growth in the third quarter on the back of strong performance from its business segments. The Hip business is expected to have witnessed growth due to the company’s comprehensive suite of solutions in navigation in direct anterior stems and surgical impactors. While this business lagged the broader market during the second quarter due to key portfolio gaps, the company has made significant progress with product introductions. Within the Knees business, the company faced some challenges from a supply standpoint.

(Read more: ZBH Gears Up for Q3 Earnings: What Lies Ahead for the Stock?)

The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.81 billion, suggesting a 3.3% rise from the year-ago reported figure. The Zacks Consensus Estimate for earnings is pinned at $1.75 per share, indicating a 6.1% improvement from the year-ago reported numbers. 

During the quarter, the company’s shares rose 1.9% compared with the industry’s 13% rise.

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 on earnings. However, this is not the case here, as you can see below.

ZBH has an Earnings ESP of -2.60% and a Zacks Rank #4 (Sell) at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zimmer Biomet Holdings, Inc. Price and EPS Surprise

Zimmer Biomet Holdings, Inc. price-eps-surprise | Zimmer Biomet Holdings, Inc. Quote

Bio-Rad: For Bio-Rad, within the Life Science business, the ongoing weakness in the biotech and biopharma end markets has adversely impacted the sales of Life Science tools and bioprocessing products. Bio-Rad has also been experiencing weaker demand in China. These factors are likely to have impeded the company’s growth in the third quarter. Clinical Diagnostics sales are expected to have increased in the third quarter, driven by increased demand for quality control immunohematology and blood typing products. (Read more: BIO Gears Up for Q3 Earnings: Here's What You Need to Know)

The Zacks Consensus Estimate for revenues is pegged at $639.9 million, suggesting a rise of 0.8% from the year-ago reported figure. The Zacks Consensus Estimate for EPS of $1.28 indicates a year-over-year decline of 45.1%.

During the third quarter, the stock surged 26.8% compared with the industry’s 13% growth.

BIO has an Earnings ESP of 0.00% and a Zacks Rank #4 at present.

Bio-Rad Laboratories, Inc. Price and EPS Surprise

Bio-Rad Laboratories, Inc. price-eps-surprise | Bio-Rad Laboratories, Inc. Quote

Bio-Techne: Its cell and gene therapy vertical has shown continued traction in recent quarters, banking on strong performances of the company’s proteomic reagent and scalable workflow solutions that enable customers to accelerate e-clinical, clinical and eventually the commercialization of these next-generation therapeutics. Within the Spatial Biology growth vertical, despite the budget reset by the pharma customers, Bio-Techne is expected to have reported strong growth, banking on the strong adoption of the company’s new spatial biology instrument COMET. (Read more: BIO Gears Up for Q1 Earnings: Here's What You Need to Know)

For the first quarter of fiscal 2025, the Zacks Consensus Estimate for Bio-Techne’s revenues is pegged at $280.9 million, indicating an increase of 1.4% from the year-ago reported figure.

The Zacks Consensus Estimate for the company’s first-quarter fiscal 2025 EPS suggests a 7.3% decline to 38 cents.

Meanwhile, during the fiscal first quarter, shares of the company rose 11.6% compared with the industry’s 5.9% rise.

TECH has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.

Bio-Techne Corp Price and EPS Surprise

Bio-Techne Corp price-eps-surprise | Bio-Techne Corp Quote

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