Medtech earnings season starts this week with fourth-quarter results from Johnson & Johnson, Intuitive Surgical and Abbott that will provide insights about the current state and health of the industry.
Analysts are optimistic going into the results season. Around 30 medical device companies preannounced fourth-quarter results or “provided directional color” at the J.P. Morgan Healthcare Conference in San Francisco earlier this month, J.P. Morgan analysts wrote in a recent research note. The comments led the analysts to tell investors that the fourth quarter “was clearly a very good quarter for medtech.”
Medtech management teams were “sounding confident on volume trends, pricing and global macro,” the analysts wrote, adding that “supply chains, staffing, and inflation have all stabilized for the most part.”
RBC Capital Markets analysts were similarly upbeat, writing about “positive momentum exiting 2023 for both procedure volumes and capital spending” in a note to investors last week.
A clearer picture of how the medtech industry fared in the fourth quarter and last year, and how companies expect to perform across 2024, will begin to emerge when J&J and Intuitive report results on Tuesday. Meanwhile, Abbott will report on Wednesday morning.
Here, we preview what to look out for in the first week of earnings for the industry:
1. Johnson & Johnson
J&J CEO Joaquin Duato set expectations for the fourth quarter in a presentation at the J.P. Morgan conference, telling attendees that he is “very confident that we'll be able to deliver on the guidance that we provided.” Duato was discussing the performance of the entire company, not just the medtech unit, but RBC analysts expect the medical device results to impress.
“We expect a positive print from [J&J] that is poised to also set up a positive tone for the rest of medtech whose earnings are to follow. [J&J] has already issued initial 2024 guidance, which sets an achievable target and positions it well for the year, in our view,” RBC analysts wrote.
J&J set its initial operational sales growth guidance at 5%-6% at an investor event last month. With guidance already in place, RBC analysts expect a focus on M&A commentary during the fourth-quarter results. In November, the company announced a $400 million deal for Laminar, intensifying competition in the left atrial appendage closure market.
2. Intuitive Surgical
Intuitive preannounced growth in procedures using its da Vinci surgical robot earlier this month. J.P. Morgan analysts said Intuitive “had the best 4Q relative to expectations” of all the stocks they cover and tipped the company to have one of the highest growth rates of all large public medtech companies this year. The timing of the launch of Intuitive’s next-generation da Vinci robot is an area of investor focus.
“With procedure growth showing no signs of slowing, and the capital cycle at a trough heading into the new year, a next-generation multi-port would meaningfully accelerate trade-in system revenue and perhaps net new placements for customers who were more willing to wait on the sidelines,” J.P. Morgan analysts wrote.
In a note to investors Thursday, BTIG analysts said an update to a ClinicalTrials.gov entry, which now says "Systems" rather than "System" and is set to run for 16 months longer than planned, “further suggests that the next-generation system may be imminent.”
RBC analysts told investors Abbott “is poised to deliver better-than-expected Q4'23 results driven by the strong procedure volume trends in Medical Devices led by their diabetes franchise.” The analysts expect the company to provide guidance that is at least in line with Wall Street’s 8% consensus estimate.
“Expectations for the year have been well-telegraphed, with guidance likely to point to high-single digit base business organic growth,” J.P. Morgan analysts wrote. “With a derisked outlook, attractive pipeline, and healthy trends across the business, we think the outlook for Abbott is the best it's been in a while.”
In the fourth quarter, J.P. Morgan analysts expect “a beat on healthy base business trends, with strong COVID testing adding additional upside.” Abbott's forecast points to $200 million in COVID-19 testing sales, according to the note, a figure the analysts called “conservative.”
The analysts are “optimistic on procedure volume trends in 4Q and expect to see good results from Abbott and its peers.”