4 Medical Stocks With the Right Setup for Q2 Earnings Beats

According to the latest Earnings Trends report, the medical sector (one of the 16 broad Zacks sectors within the Zacks Industry) is projected to experience a 12.3% decline in earnings for the second quarter, even as revenues are anticipated to rise by 4.9%. The disconnect reflects ongoing margin pressure rather than weakening demand.

Factors at Play for Medical Stocks in Q2

The medical sector spans a wide and tightly linked network of businesses, from hospitals and physician groups to nursing care facilities, insurers, drugmakers, device companies, and outpatient and home care providers. Demand remained resilient during the quarter, supported by an aging population, greater use of medical services and continued need for prescription drugs and healthcare products.

Margins, however, remained under pressure. Companies continued investing in digital platforms, automation and AI-enabled tools to improve efficiency and patient care, but those investments increased near-term expenses. Labor costs also stayed elevated, particularly for hospitals and other provider organizations that rely heavily on skilled workers.

Health insurers faced another challenging quarter as elevated medical utilization, reimbursement constraints and regulatory changes continued to weigh on profitability. Even so, stronger pricing discipline, premium increases, scaling back less attractive products and tighter cost management helped offset part of the pressure and supported gradual margin improvement for some companies.

Hospitals and healthcare facilities continued to benefit from steady patient volumes, while higher revenue per admission provided an additional lift where pricing remained favorable. Even so, rising labor and supply costs limited the pace of margin expansion.

Steady prescription utilization and favorable branded drug trends supported pharmaceutical companies and distributors during the quarter. Across the sector, wider adoption of AI, analytics and automation remained a key long-term growth driver, improving workflows, supporting clinical decisions and creating opportunities for greater operating efficiency.

How to Identify Potential Outperformers?

Spotting healthcare stocks poised for an earnings beat is not easy in today’s crowded market. But our proprietary methodology cuts through the noise, pinpointing companies with strong potential to outperform. Backed by in-depth research and market insight, we have leveraged the Zacks Stock Screener to identify top healthcare names that stand out ahead of their earnings releases.

These stocks have the ideal combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to surpass expectations. Our research shows that for stocks with this combination, the chances of an earnings beat are as high as 70%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Our Picks in the Medical Sector

One can start with Humana, which is one of the largest health care plan providers in the United States. Headquartered in Louisville, KY, the company’s second-quarter earnings are expected to have benefited from higher premiums (25.6% year-over-year growth expected), insurance and specialty membership and strength in the CenterWell unit.

The Zacks Consensus Estimate for operating income from the Insurance unit indicates 10.2% growth from a year ago. The consensus estimate for Humana’s second-quarter earnings is pegged at $6.22 per share, which improved by 5 cents over the past month. The consensus mark for revenues of $40.65 billion indicates a 25.5% increase. HUM has an Earnings ESP of +1.71% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

It beat earnings estimates in three of the past four quarters and missed once, with an average of 3.8%.

You may also watch CVS Health, which is a health solutions company with integrated offerings across the entire spectrum of pharmacy care. Headquartered in Woonsocket, RI, the company’s second-quarter earnings are expected to have benefited from increased net investment income (3.3% growth expected).

The Zacks Consensus Estimate for products revenues indicates 2.8% year-over-year growth. The consensus estimate for CVS Health’s second-quarter earnings is pegged at $1.87 per share, which indicates 3.3% year-over-year growth. The consensus mark for revenues of $100.18 billion predicts a 1.3% increase. CVS has an Earnings ESP of +1.42% and a Zacks Rank #2.

It beat earnings estimates in all the past four quarters, with an average of 16.8%.

Dublin, OH-based Cardinal Health is one of the world’s largest healthcare services and products providers. It is witnessing brand and specialty pharmaceutical sales growth from existing customers and Cardinal Health brand growth. It has an Earnings ESP of +1.24% and a Zacks Rank #2.

The consensus mark for fourth-quarter fiscal 2026 revenues is pegged at $65.61 billion, indicating 9.1% year-over-year growth. The EPS estimate of $2.42 signals a 16.4% year-over-year jump. The Zacks Consensus Estimate for the fiscal fourth-quarter Pharmaceutical and Specialty Solutions revenues indicates 10.1% year-over-year growth. The same for Global Medical Products and Distribution signals a 2% increase.

It beat earnings estimates in each of the past four quarters, the average surprise being 10.3%.

Finally, we have San Diego, CA-based ACADIA Pharmaceuticals, a biopharmaceutical company developing innovative medicines to address central nervous system (CNS) disorders and rare diseases. Its second quarter results are expected to have been driven by contributions from Daybue and continued growth in Nuplazid's market share.

The consensus estimate for Daybue product sales suggests a 15.8% increase from a year ago. The same for Nuplazid signals a 77% increase. The Zacks Consensus Estimate for ACADIA Pharmaceuticals’ bottom line for the to-be-reported quarter is pegged at 6 cents per share, which improved by a penny over the past week. The consensus mark for revenues is pegged at $293.82 million. ACAD has an Earnings ESP of +25.00% and a Zacks Rank #2.

It beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 20.8%.

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This article originally published on Zacks Investment Research (zacks.com).

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