Johnson & Johnson will be the first company to provide
results that shed light on those questions. The continuation of the COVID-19
pandemic, particularly in China and other parts of Asia, has tempered analyst
expectations about the performance of J&J’s medical device unit. Earlier
this month, J.P. Morgan analysts forecast J&J will miss the consensus sales
forecast by $557 million, primarily because of a shortfall in its medtech
business.
“On the MedTech business, we are moderately lowering
estimates to reflect (a) the near-term impact of Omicron challenges on 1H22
procedure volumes particularly in China and broader Asia while (b) we expect
growth stabilization in what we hope to be a normalized 2H22. We expect softer
1Q/2Q 2022 results and guidance based on challenges from Omicron particularly
with ongoing China disruptions,” the analysts wrote in a note to investors.
The extent that COVID-19 cases affect results will depend on
a geographic sales mix, with the anticipated recovery of elective procedures in
the U.S. and Europe after the winter wave contrasting with the situation in
China, where almost all of the 26 million people in Shanghai have been locked
down.
Intuitive, which will report results on April 21, has
limited exposure to China. Analysts at Bank of America put China’s share of
Intuitive procedures at 4%, suggesting the company can weather disruption in
the country if volumes rebound in the U.S. The analysts are upbeat about
Intuitive’s prospects, naming the company as one of their top picks going into
the quarter.
The bullish assessment reflects a belief that the 10.9%
procedure growth expected by Wall Street “looks like a low bar looking at
sequential growth.” Yet, like other high-tech medtech companies, the robotic
surgery specialist needs semiconductors, as an ongoing shortage has affected
the medical device sector and a host of other industries.
Intuitive has highlighted supply chain disruption as a risk
factor in 2022, according to analysts at RBC Capital Markets, and faced minor,
immaterial limitations on the supply of skill simulators in the fourth quarter.
However, the BofA analysts said the company "sounded good on chip
availability for this quarter" at an event held last month. If supply
disruptions pressure margins, the BofA analysts think the company has some
flexibility to offset margins given its plus-20% growth in operating expenses.
The RBC analysts named Intuitive alongside Abbott on the
list of medtech companies that may be exposed to disruption to the supply of
electronic components. Abbott will reveal the extent to which the supply
situation has affected its business when it reports earnings on April 20.