Financial Forecasts Show Medical Industry Growth

Gardner Intelligence’s quarterly review of the medical industry, based on Gardner’s proprietary data and the quarterly financial filings of 70 publicly-traded medical firms, revealed an industry that continues to see growing free cash flow and revenues. In the 12-month period ending with the first quarter of 2018, total free cash flow grew by nearly 3 percent after posting three prior quarters of contractions while revenue growth was reported above 7 percent and earnings before interest, taxes, depreciation and amortization contracted by slightly less than 2 percent.

Importantly for the manufacturing industry, capital expenditure across the medical industry, according to Gardner’s analysis, rose by 2.9 percent in the year-to-date period ending first-quarter 2018. The latest data illustrate a recent trend of slowing growth in capital expenditures after reaching a peak expenditure growth rate of over 15 percent during the first quarter of 2017. This may have been in part due to the industry rebounding from a lackluster 2015.

Wall Street forecasts for medical industry revenues and earnings are for strengthening 2018 results with peak revenue growth occurring during the second half of 2018. Earnings forecasts suggest peak growth may occur during the first quarter of 2019 with initial earnings growth starting as early as the second quarter of 2018. Earnings are expected to return to long-run, single-digit levels by late 2019. Both forecasts imply near-term that the industry should be well positioned to increase research and development and capital spending well into 2019.

Gardner’s proprietary business index data of manufacturers supplying the medical industry supports Wall Street’s latest optimism. Medical manufacturers are reporting to Gardner that overall business conditions have been improving since early 2017 and currently are some of the best since 2012. Production and new orders growth are reported as the fastest growing business components within medical manufacturing. Production growth during the second-half of 2017 was eclipsed by new orders growth, resulting in recent backlog growth. Looking forward, manufacturers will need to produce not only to fill current order, but also work off backlog levels in the remainder of 2018 and potentially beyond. This suggests that Gardner’s data agrees and supports Wall Street’s optimistic expectations of the next several quarters.