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The medical industry has a lot to prove in the upcoming Q1 earnings season, as the last round of earnings and guidance didn’t do much to reassure investors who were already nervous for other reasons. However, some major stocks in the sector have been hitting new highs lately, especially on the hardware side of the group. Here are three such companies reporting earnings this week: • Johnson & Johnson ( JNJ ) takes its traditional place at the head of the line as it reports its earnings early Tuesday, the first of the big drug companies to report in this cycle. Its growth is expected to be modest, due to both its gigantic size and the foreign-exchange headwinds that have been dragging on global companies’ earnings this year. Analysts polled by Thomson Reuters estimate that Q1 revenue rose 0.7% over the year-earlier quarter to $17.5 billion. Earnings are estimated at $1.66 a share, up 6%. Despite its muted growth, Johnson & Johnson stock hit a record high of 110.40 in trading Friday (closing the day at 110.18, up a fraction), and has maintained an IBD Relative Strength Rating in the 80s for the last six weeks. The mood on Wall Street going into the quarter seems bullish. Late Thursday, RBC Capital Markets analyst Glenn Novarro raised his estimates based on his reading of drug-prescription and foreign-exchange trends. “ IMS ( IMS ) script trends for several key drugs suggest another strong pharma quarter in 1Q (+9% year-over-year ex-FX and Olysio),” Novarro wrote. (Olysio is a hepatitis C treatment.) “Additionally, our analysis of currency movements since the beginning of the year suggests the negative FX impact on full-year results should be less than initially expected.” Novarro noted that one likely topic of conversation on the conference call will be this month’s FDA approval of Pfizer ’s ( PFE ) Inflectra, a biosimilar version of J&J’s blockbuster immunology drug Remicade. • Robotic-surgery specialist Intuitive Surgical ( ISRG ) is due to report after the close Tuesday. Analysts estimate that its Q1 earnings rose 21% over last year’s Q1 to $4.33 a share, with sales up 11.5% to $593 million. Intuitive Surgical has also been a top-performing stock lately, as the company has been making a comeback financially with the rollout of its da Vinci Xi surgical system and improving procedure growth. Intuitive Surgical stock hit a new high of 630.67 on Wednesday, up more than 15% this year, and boasts an excellent IBD Composite Rating of 98. It closed Friday at 624.22. “Heading into 1Q, the key question for investors is whether the stock is baking in too much optimism or is this the start of a new product cycle,” Evercore ISI analyst Vijay Kumar wrote in an email to clients Friday. “We expect procedure volumes to be healthy, with growth in general surgery leading the way (extra day from leap year should also help).” • Similar concerns about an over-optimistic market seem to be dogging orthopedics giant Stryker ( SYK ), which is due to report after the close Wednesday. The stock has also been on a roll, on Wednesday hitting a new high of 110.40 that was 19% above where it wound up last year. Shares closed Friday at 109.80. Stryker stock kept climbing last week even though Robert W. Baird downgraded it to neutral and Barclays resumed coverage at underweight. The latter wrote that Stryker’s valuation appears to be full going into its Q1 and that it’s facing more competition from a rejuvenated Zimmer Biomet ( ZBH ). Analysts covering Stryker estimate that sales rose 3.9% in the quarter to $2.47 billion, with earnings up 8% to $1.20 a share. Scalper1 News
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