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3 Stocks to Capitalize on Promising Medical Products Industry
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The COVID-19 pandemic, which turned out to be a biological crisis of unprecedented nature, has altered the very nature and dynamics of the healthcare industry. The Zacks Medical – Products industry was also not spared by the pandemic, and bore the brunt of widespread supply chain disruptions and deferral of elective procedures. However, with the reopening of the economy, slow resumption of elective procedures, rising demand for in vitro diagnostics (IVD) and increasing dependence on Artificial Intelligence (AI) & Robotics, the industry participants are likely to benefit in the days ahead. Abbott Laboratories (ABT - Free Report) , Baxter International Inc. (BAX - Free Report) and ResMed Inc. (RMD - Free Report) are likely to gain from the abovementioned factors.
Industry Description
The industry comprises companies that provide medical products and cutting-edge technologies for diagnosis, observation, consultation, treatment and other healthcare services. Notably, the industry players are primarily focused on research and development. The industry participants primarily cater to vital therapeutic areas like cardiovascular devices, nephrology and urology devices, ophthalmic devices, neurological devices, dermatological devices, respiratory devices, skin care devices, dental devices, orthopedic devices and gastrointestinal devices.
Major Trends Shaping the Future of Medical Products Industry
AI, Medical Mechatronics & Robotics: The rising utilization of minimally-invasive robot-assisted surgeries, self-automated home-based care, use of IT for quick and improved patient care, and shift of the payment system to a value-based model underscore the growing influence of AI in the Medical Products space. In fact, mechatronics — a high-end technology incorporating electronics, ML and mechanical engineering — is rapidly becoming a defining characteristic of the space. Intuitive Surgical (ISRG - Free Report) deserves a special mention with respect to AI, robotics and medical mechatronics. The company designs, manufactures and markets the da Vinci surgical system — an advanced robot-assisted surgical platform. This Mechatronic-based platform enables minimally-invasive surgery that helps reduce trauma associated with open surgery.
Rising Demand for IVD: Toward the end of February, the COVID-19 outbreak started to spread rapidly and took the shape of a pandemic. This led to the rise in global demand for diagnostic testing kits in order to curb the spread of the virus. The need of the hour became testing and that led to a shift in the pipeline of IVD products, with a large number of rapid, point-of-care devices going into development. Companies not only received emergency use authorization (EUA) from the FDA but also have boosted production to aid testing shortages. The industry players anticipate significant demand for rapid diagnostic testing in the future as well and are well poised to capitalize on the same.
Emerging Markets Hold Promise: Given the rising medical awareness and economic prosperity, emerging economies have been witnessing solid demand for medical products. An aging population, relaxed regulations, cheap skilled labor, increasing wealth and government focus on healthcare infrastructure make these markets extremely lucrative for global medical device players.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Medical Products industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #122, which places it in the top 49% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few medical products stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Performance
The industry has outperformed its sector in the past year. However, it fell short of the Zacks S&P 500 composite over the same time frame.
The industry has climbed 8.4% over this period compared with the S&P 500 and the broader sector’s rally of 15.6% and 7.2%, respectively.
One Year Price Performance
Industry’s Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry is currently trading at 27.34X compared with the sector’s 22.37X and the S&P 500’s 22.43X.
Over the past five years, the industry has traded as high as 30.99X and as low as 17.09X, with the median being at 20.77X as the charts show below.
Price-to-Earnings Forward Twelve Months (F12M)
Price-to-Earnings Forward Twelve Months (F12M)
3 Promising Medical Products Stocks
Abbott Laboratories: Abbott discovers, develops, manufactures and sells a diversified line of health care products. Since the onset of the COVID-19 outbreak, the company has been making significant efforts to progress in the area of diagnostic testing for COVID-19. Over the first half of the year, Abbott has developed and launched several COVID-19 tests across its testing platform for both laboratory and rapid point-of-care settings. During the third-quarter 2020 earnings call, the company noted that it had sold just under $900 million of COVID-19 testing kits. Based on this, the company expects fourth-quarter sales run rate to be around $1.3 billion to $1.4 billion. Apart from this, the Zacks Rank #3 (Hold) company witnessed significant growth in its Diabetes business on the back of the solid worldwide adoption of FreeStyle Libre. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For this North Chicago, IL-based company, the Zacks Consensus Estimate for 2020 revenues indicate an improvement of 6.1%. It has a trailing four-quarter earnings surprise of 14.9%, on average.
Price and Consensus: ABT
Baxter International Inc.: Baxter is a global medical technology company. In its third-quarter 2020 results, the company reported improvement in bottom and top lines, and exhibited solid performance across its three geographic segments. Moreover, the Zacks Rank #3 company witnessed significant improvement in its segments (with the exception of Medication Delivery) in the third quarter, which in turn instilled investor confidence. Additionally, receipt of several regulatory approvals during the ongoing pandemic shows promise.
For this Deerfield, IL-based company, the Zacks Consensus Estimate for 2020 revenues indicate an improvement of 1.5%. It has a trailing four-quarter earnings surprise of 6.6%, on average.
Price and Consensus: BAX
ResMed Inc.: ResMed continues to hold a major position as designer, manufacturer and a distributor in the worldwide market for generators, masks, and related accessories for the treatment of sleep-disordered breathing (SDB) and other respiratory disorders. Since March, the company has ramped up production of ventilators, masks and other respiratory devices owing to the high demand for critical-care products. In fact, the Zacks Rank #2 (Buy) company saw a boost in its sales during first-quarter fiscal 2021 on the back of increase in demand for the aforementioned critical care products, and provision of digital health solutions and other tools to customers aiding remote care amid the pandemic.
For this San Diego, CA-based company, the Zacks Consensus Estimate for 2021 revenues indicate an improvement of 5.2%. It has a trailing four-quarter earnings surprise of 28.9%, on average.
Price and Consensus: RMD
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Bigstock
3 Stocks to Capitalize on Promising Medical Products Industry
The COVID-19 pandemic, which turned out to be a biological crisis of unprecedented nature, has altered the very nature and dynamics of the healthcare industry. The Zacks Medical – Products industry was also not spared by the pandemic, and bore the brunt of widespread supply chain disruptions and deferral of elective procedures. However, with the reopening of the economy, slow resumption of elective procedures, rising demand for in vitro diagnostics (IVD) and increasing dependence on Artificial Intelligence (AI) & Robotics, the industry participants are likely to benefit in the days ahead. Abbott Laboratories (ABT - Free Report) , Baxter International Inc. (BAX - Free Report) and ResMed Inc. (RMD - Free Report) are likely to gain from the abovementioned factors.
Industry Description
The industry comprises companies that provide medical products and cutting-edge technologies for diagnosis, observation, consultation, treatment and other healthcare services. Notably, the industry players are primarily focused on research and development. The industry participants primarily cater to vital therapeutic areas like cardiovascular devices, nephrology and urology devices, ophthalmic devices, neurological devices, dermatological devices, respiratory devices, skin care devices, dental devices, orthopedic devices and gastrointestinal devices.
Notably, some of the key players in this industry include Boston Scientific Corporation (BSX - Free Report) , Stryker Corporation (SYK - Free Report) , Medtronic plc (MDT - Free Report) Bio-Rad Laboratories, Inc. (BIO - Free Report) , Zimmer Biomet Holdings, Inc. (ZBH - Free Report) and Perrigo Company plc (PRGO - Free Report) .
Major Trends Shaping the Future of Medical Products Industry
AI, Medical Mechatronics & Robotics: The rising utilization of minimally-invasive robot-assisted surgeries, self-automated home-based care, use of IT for quick and improved patient care, and shift of the payment system to a value-based model underscore the growing influence of AI in the Medical Products space. In fact, mechatronics — a high-end technology incorporating electronics, ML and mechanical engineering — is rapidly becoming a defining characteristic of the space. Intuitive Surgical (ISRG - Free Report) deserves a special mention with respect to AI, robotics and medical mechatronics. The company designs, manufactures and markets the da Vinci surgical system — an advanced robot-assisted surgical platform. This Mechatronic-based platform enables minimally-invasive surgery that helps reduce trauma associated with open surgery.
Rising Demand for IVD: Toward the end of February, the COVID-19 outbreak started to spread rapidly and took the shape of a pandemic. This led to the rise in global demand for diagnostic testing kits in order to curb the spread of the virus. The need of the hour became testing and that led to a shift in the pipeline of IVD products, with a large number of rapid, point-of-care devices going into development. Companies not only received emergency use authorization (EUA) from the FDA but also have boosted production to aid testing shortages. The industry players anticipate significant demand for rapid diagnostic testing in the future as well and are well poised to capitalize on the same.
Emerging Markets Hold Promise: Given the rising medical awareness and economic prosperity, emerging economies have been witnessing solid demand for medical products. An aging population, relaxed regulations, cheap skilled labor, increasing wealth and government focus on healthcare infrastructure make these markets extremely lucrative for global medical device players.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Medical Products industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #122, which places it in the top 49% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few medical products stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Performance
The industry has outperformed its sector in the past year. However, it fell short of the Zacks S&P 500 composite over the same time frame.
The industry has climbed 8.4% over this period compared with the S&P 500 and the broader sector’s rally of 15.6% and 7.2%, respectively.
One Year Price Performance
Industry’s Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry is currently trading at 27.34X compared with the sector’s 22.37X and the S&P 500’s 22.43X.
Over the past five years, the industry has traded as high as 30.99X and as low as 17.09X, with the median being at 20.77X as the charts show below.
Price-to-Earnings Forward Twelve Months (F12M)
Price-to-Earnings Forward Twelve Months (F12M)
3 Promising Medical Products Stocks
Abbott Laboratories: Abbott discovers, develops, manufactures and sells a diversified line of health care products. Since the onset of the COVID-19 outbreak, the company has been making significant efforts to progress in the area of diagnostic testing for COVID-19. Over the first half of the year, Abbott has developed and launched several COVID-19 tests across its testing platform for both laboratory and rapid point-of-care settings. During the third-quarter 2020 earnings call, the company noted that it had sold just under $900 million of COVID-19 testing kits. Based on this, the company expects fourth-quarter sales run rate to be around $1.3 billion to $1.4 billion. Apart from this, the Zacks Rank #3 (Hold) company witnessed significant growth in its Diabetes business on the back of the solid worldwide adoption of FreeStyle Libre. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For this North Chicago, IL-based company, the Zacks Consensus Estimate for 2020 revenues indicate an improvement of 6.1%. It has a trailing four-quarter earnings surprise of 14.9%, on average.
Price and Consensus: ABT
Baxter International Inc.: Baxter is a global medical technology company. In its third-quarter 2020 results, the company reported improvement in bottom and top lines, and exhibited solid performance across its three geographic segments. Moreover, the Zacks Rank #3 company witnessed significant improvement in its segments (with the exception of Medication Delivery) in the third quarter, which in turn instilled investor confidence. Additionally, receipt of several regulatory approvals during the ongoing pandemic shows promise.
For this Deerfield, IL-based company, the Zacks Consensus Estimate for 2020 revenues indicate an improvement of 1.5%. It has a trailing four-quarter earnings surprise of 6.6%, on average.
Price and Consensus: BAX
ResMed Inc.: ResMed continues to hold a major position as designer, manufacturer and a distributor in the worldwide market for generators, masks, and related accessories for the treatment of sleep-disordered breathing (SDB) and other respiratory disorders. Since March, the company has ramped up production of ventilators, masks and other respiratory devices owing to the high demand for critical-care products. In fact, the Zacks Rank #2 (Buy) company saw a boost in its sales during first-quarter fiscal 2021 on the back of increase in demand for the aforementioned critical care products, and provision of digital health solutions and other tools to customers aiding remote care amid the pandemic.
For this San Diego, CA-based company, the Zacks Consensus Estimate for 2021 revenues indicate an improvement of 5.2%. It has a trailing four-quarter earnings surprise of 28.9%, on average.
Price and Consensus: RMD
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>