Want Better Returns? Don’t Ignore These 2 Medical Stocks Set to Beat Earnings
The pharmaceutical sector is an ever-evolving environment, where investor optimism often hinges on quarterly earnings reports. The significance of these reports cannot be overstated; they provide insights into a company’s recent performance and indicate future potential. Among the many metrics assessed, earnings figures stand out as a keystone for gauging market expectations. Investors who can anticipate and capitalize on positive earnings surprises may find themselves with stronger returns, and the use of earnings prediction tools has proven particularly effective in this pursuit.
The Earnings ESP Tool Explained
One such advanced tool employed by savvy investors is the Earnings Expected Surprise Prediction (ESP). This metric focuses on up-to-date analyst revisions, as more contemporaneous estimates tend to incorporate the most relevant market data. The fundamental premise of the ESP model is straightforward: it evaluates the difference between the Most Accurate Estimate and the Consensus Estimate. The resulting percentage delineates the Expected Surprise Prediction.
The strength of the ESP is further evident when combined with the Zacks Rank—a numerical system analyzing the performance outlook of stocks. A Zacks Rank of #3 (Hold) or better coupled with a positive Earnings ESP reveals an impressive probability of surpassing earnings expectations, with reported successes in two-thirds of scenarios. Notably, historical data indicates an impressive average return of 28.3% annually when employing these criteria over the past decade.
Current Stock Highlights: Pfizer and DexCom
Let’s delve into two medical stocks poised to potentially exceed their earnings estimates in the coming months: Pfizer (PFE) and DexCom (DXCM).
Pfizer (PFE)
Pfizer, a leader in the pharmaceutical industry, currently holds a #3 (Hold) rating in the Zacks Rank system. With an upcoming earnings announcement scheduled for October 29, 2024, the Most Accurate Estimate for PFE stands at $0.65 per share, slightly ahead of the Consensus Estimate of $0.64. This results in a positive Earnings ESP of +2.68%, suggesting that the pharmaceutical giant may deliver an upside surprise during its earnings reveal.
Pfizer’s position is bolstered by its robust product line and ongoing commitment to research and development. As the company continues to pivot from its pandemic-era focus to a more diversified therapeutic portfolio, investors should monitor upcoming announcements for new drug approvals and pipeline updates that could significantly affect share value.
DexCom (DXCM)
Another medical stock worth watching is DexCom, which also carries a Zacks Rank of #3 (Hold). Scheduled to report its earnings on February 13, 2025, DexCom has a Most Accurate Estimate of $0.52 per share, above its Consensus Estimate of $0.51. This positions DexCom with an Earnings ESP of +0.98%, a positive indicator for an earnings surprise.
DexCom specializes in the diabetes management sector, developing innovative continuous glucose monitoring (CGM) systems that are gaining traction. The increasing prevalence of diabetes and advancements in technology have opened new avenues for growth. As DexCom continues to enhance its product offerings and expand its market presence, it remains a strong candidate for investors looking for value in the medical space.
Investment Implications and Strategy
While earnings surprises can significantly impact stock prices, investors should take a holistic approach, factoring in broader market conditions, competitive landscapes, and potential regulatory changes. Both Pfizer and DexCom exhibit positive characteristics based on their Earnings ESP metrics; however, it is critical to keep an eye on external variables that might affect their quarter-over-quarter performance.
The use of the Earnings ESP tool enables investors to strategically align their portfolios with firms that boast the potential for exceeding earnings expectations. Stocks with Zacks Rank ratings of #1 (Strong Buy) to #2 (Buy) paired with a positive Earnings ESP have a better likelihood of outperforming the market. This, coupled with market insight and sector performance assessments, builds a comprehensive investment strategy aimed at maximizing returns.
Conclusion
As always, due diligence remains essential when investing in pharmaceutical stocks. Pfizer and DexCom present intriguing potential for investors seeking companies likely to deliver positive earnings surprises. By leveraging tools like the Earnings ESP and staying apprised of sector developments, investors can better navigate the complexities of the pharmaceutical market and position themselves for success.
Disclaimer:
This article is intended for informational purposes only and should not be considered as financial advice. Investors should conduct their own research and consider their individual circumstances before making investment decisions.
