Raymond James Thinks Med Tech Investors are Somewhat 'Paralyzed' Ahead Of Q1 Earnings

  • Raymond James has outlined its expectations for next week when Johnson & Johnson JNJAbbott Laboratories ABT, and Intuitive Surgical Inc ISRG will report Q1 FY22 earnings.
  • Analysts believe that the Med Tech investors have become somewhat 'paralyzed' given the macro/factor-driven concerns. 
  • On the macro, investor attention seems to be focused less on revenue growth and more on supply chain/margin uncertainty, which the Russia-Ukraine conflict has amplified. 
  • "1Q FY22 earnings will give us more clarity on the supply dynamic, but our belief is that the supply chain issues will improve over the coming quarters," analysts tell investors.
  • Med Tech is (correctly) viewed as a 'growth group,' which has weighed on sentiment as investors have migrated to value-oriented names in 2022. 
  • Analysts suggest that while omicron will impact 1Q revenue, this dynamic should be factored into consensus estimates. However, FX will provide more of a headwind (by an incremental 70-120bp to JNJ/ABT), favorable for the demand profile. 
  • The analysts expect ISRG to have the largest/cleanest beat and believe it has the most interesting set-up.
  • It expects both JNJ's (FX, Russia/Ukraine exposure) and ABT's (Pediatric-Nutrition recall, FX) print and conference call to be a bit noisier (than ISRG's) given the relative macro exposure.
  • In summary, the key issues are the pace of the procedure recovery, the impact of COVID-19 in China, the Russia-Ukraine conflict, and supply chain status.
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