”Bill AlpertThe September quarter saw the biggest plunge in medical-device stocks since 2020s lockdowns. Dragging them were fears that new weight-loss drugs will slash demand for devices that treat diabetes, sleep problems, and other weight-related conditions. September financial results from these companies won't show much drug damage, however. That's the view of Mizuho Securitiesanalyst Anthony Petrone, in an earnings preview published Tuesday. His September quarter estimates for his medtech coverage are slightly above Wall Street's consensus estimates. "For now, we believe the risk is more perceived than real," Petrone wrote. Medical-device stocks have lost nearly 20% since July, as measured by the U.S. Medical Device iShares exchange-traded fund (ticker: IHI). In dollars, that's amounted to some $370 billion in reduced market capitalization. The drop is the negative counterpart to the surge in Eli Lilly (LLY) and Novo Nordisk (NVO) on hopes that their drugs Ozempic, Mounjaro, and Wegovy will stem epidemic obesity. Sour sentiment on device stocks has compelled Petrone and most other medtech analysts to reduce their price targets. But feedback from doctors convinces him that September-quarter sales and earnings for most of the companies will be okay. Heart-valve vendors like Edwards Lifesciences(EW) aren't exposed to weight-loss drugs, Petrone writes. He expects Edwards to report $2.55 a share in September-quarter profit when it reports on Oct. 26, thanks to a recovery in valve procedures. He's got a Buy rating on the stock. The Mizuho analyst doesn't cover diabetes-device stocks such as DexCom (DXCM) and Insulet (PODD) that have suffered some of the steepest selloffs. Businesses that treat sleep apnea also lost favor, and the analyst thinks that investors could be pleasantly surprised by September results from ResMed (RMD) and Inspire Medical Systems (INSP). He rates both shares at Buy. Inspire stock is down more than 50% since July, on concerns that less obesity will mean less demand for its apnea implant devices. But Petrone raised his September-quarter sales estimate -- to $160 million, compared with $109 million a year ago -- as doctors tell him that volumes are growing. Inspire is still running at a loss, as the company builds its business. But Petrone thinks its strong sales growth should reassure investors when it reports on Nov. 7. September-quarter sales volumes were also good for ResMed, Petrone believes. In the long term, weight-loss drugs may cut demand, but he figures ResMed will show sales of $4.6 billion, and earnings per share of $7.04, when it reports on Oct. 26. One of the triggers of the medtech selloff was the earnings call of Intuitive Surgical (ISRG) in July, when the surgical-robot seller attributed a pause in weight-loss surgical volumes to the use of weight-loss drugs. The Mizuho analyst rates Intuitive at Neutral on the shares. He has mixed expectations for Intuitive's September-quarter earnings report -- but partly because hospitals are moderating their capital spending. Questions about weight-loss drugs will figure prominently on Intuitive's earnings call on Thursday, Oct. 19, Petrone figures. Write to Bill Alpert at
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This represents very much my own view of RMD -
Future aspects and colors will be determining in terms of SP
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