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2 Stocks to Buy on Rising Demand for Scientific Instruments
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The coronavirus pandemic has created unique opportunities for the Zacks Instruments - Scientific industry participants — Mettler-Toledo International (MTD - Free Report) and Bruker (BRKR - Free Report) . These companies are gaining from solid demand for coronavirus testing tools as well as rising instrument orders across the globe. Moreover, increasing health care spending driven by an aging demography and continued innovation in the pharma and life sciences end-markets are key catalysts despite coronavirus-induced macroeconomic uncertainties. Increasing demand for generic drugs and biosimilars is driving growth for scientific tool and apparatus providers. Further, the reopening of university research laboratories as well as applied and industrial labs globally is a driving factor for the near term.
Industry Description
The Zacks Instruments - Scientific industry comprises companies offering scientific instruments, analytical tools, diagnostic solutions, precision instruments & services, and test & sensor solutions. The primary end-markets served by the industry participants are life science research in academia, medical schools and government, pharmaceuticals and biotechnology, microbiology and diagnostics, nanotechnology, and materials science research. A few companies also serve the food and nutritional safety, biochemical, and industrial spaces. Most of the industry participants are under stringent regulatory scrutiny worldwide. They have to adhere to the U.S. Food and Drug Administration (FDA) norms as well as rules set by other global regulatory bodies for serving highly regulated end-markets like life sciences and pharma.
3 Trends Shaping the Future of Instruments-Scientific Industry
Strong End-Market Demand: The industry is benefiting from strong end-market demand, particularly from the life science, pharmaceutical and academic markets. Increasing demand for generic drugs and biosimilars is driving growth for scientific tool and apparatus providers. Additionally, pharma companies are focusing on rapidly growing areas like proteomics and phenomics, biopharma and applied, microbiology and diagnostics, and neuroscience and cell microscopy, which creates significant demand for the instruments provided by industry participants.
Aging Demography Driving Spending: Socioeconomic factors like an aging demography and increasing environmental regulations are driving demand for scientific measurement solutions. Moreover, robust worldwide healthcare spending is a major growth driver.
Solid Emerging Market Prospects: Further, the industry is gaining from increasing exposure to developing economies like China and India. Prospects in China are huge as regulators are attempting to raise the country’s biopharma industry to global standards. Moreover, efforts to improve the drug development process and production quality in the country are noteworthy. These factors are resulting in strong demand for instruments.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Instruments - Scientific industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #55, which places it at the top 22% 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 solid 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.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. Since Feb 28, 2021, the industry’s 2022 earnings estimates have moved up 13.2%.
Before we present a few 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 Beats Sector and S&P 500
The Zacks Instruments – Scientific industry has outperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has risen 16.6% over this period compared with the S&P 500’s increase of 11.9% and the broader sector’s decline of 1.5%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month P/E, which is a commonly used multiple for valuing scientific instrument stocks, we see that the industry is currently trading at 29.45X compared with the S&P 500’s 19.7X and the Zacks Computer and Technology sector’s 27.48X.
Over the last five years, the industry has traded as high as 36.33X, as low as 26.32X and at the median of 31.60X, as the chart below shows.
Forward 12-Month Price-to-Earnings (P/E) Ratio
2 Scientific Instruments Providers to Buy
Mettler-Toledo International: This Polaris Parkway, Columbus-based company has returned 22.5% in the past year. This Zacks Rank #2 (Buy) company is benefiting from solid momentum across its laboratory and Industrial segments. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Mettler Toledo’s strengthening presence in the Americas, Europe, Asia and the Rest of the World remains positive. Furthermore, portfolio strength, cost-cutting efforts, robust sales and marketing strategies, benefits from investments in Spinnaker sales, and field resources are contributing well. Also, a strong core industrial business is encouraging. Further, solid demand across pharmaceutical and life science markets is a tailwind.
The Zacks Consensus Estimate for Mettler-Toledo’s current-year earnings has moved up 1.6% to $38.36 per share over the past 30 days.
Price and Consensus: MTD
Bruker: This Billerica, MA-based company is benefiting from growth in its Nano Group’s microelectronics and semiconductor metrology tools.
This Zacks Rank #2 (Buy) company is riding on strong prospects for CALID Group and BioSpin. Continued growth in mass spectrometry and microbiology businesses, along with strength in the FTIR/Near IR/Raman molecular spectroscopy products lines, has been beneficial for CALID Group.
Bruker’s BioSpin's solution has been gaining adoption not only among academic and government customers but also from pharmaceutical and biotechnology companies.
Notably, the Zacks Consensus Estimate for Bruker’s 2022 earnings has risen by a penny to $2.29 per share in the past 30 days. The stock has rallied 8.9% in the past year.
Price and Consensus: BRKR
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2 Stocks to Buy on Rising Demand for Scientific Instruments
The coronavirus pandemic has created unique opportunities for the Zacks Instruments - Scientific industry participants — Mettler-Toledo International (MTD - Free Report) and Bruker (BRKR - Free Report) . These companies are gaining from solid demand for coronavirus testing tools as well as rising instrument orders across the globe. Moreover, increasing health care spending driven by an aging demography and continued innovation in the pharma and life sciences end-markets are key catalysts despite coronavirus-induced macroeconomic uncertainties. Increasing demand for generic drugs and biosimilars is driving growth for scientific tool and apparatus providers. Further, the reopening of university research laboratories as well as applied and industrial labs globally is a driving factor for the near term.
Industry Description
The Zacks Instruments - Scientific industry comprises companies offering scientific instruments, analytical tools, diagnostic solutions, precision instruments & services, and test & sensor solutions. The primary end-markets served by the industry participants are life science research in academia, medical schools and government, pharmaceuticals and biotechnology, microbiology and diagnostics, nanotechnology, and materials science research. A few companies also serve the food and nutritional safety, biochemical, and industrial spaces. Most of the industry participants are under stringent regulatory scrutiny worldwide. They have to adhere to the U.S. Food and Drug Administration (FDA) norms as well as rules set by other global regulatory bodies for serving highly regulated end-markets like life sciences and pharma.
3 Trends Shaping the Future of Instruments-Scientific Industry
Strong End-Market Demand: The industry is benefiting from strong end-market demand, particularly from the life science, pharmaceutical and academic markets. Increasing demand for generic drugs and biosimilars is driving growth for scientific tool and apparatus providers. Additionally, pharma companies are focusing on rapidly growing areas like proteomics and phenomics, biopharma and applied, microbiology and diagnostics, and neuroscience and cell microscopy, which creates significant demand for the instruments provided by industry participants.
Aging Demography Driving Spending: Socioeconomic factors like an aging demography and increasing environmental regulations are driving demand for scientific measurement solutions. Moreover, robust worldwide healthcare spending is a major growth driver.
Solid Emerging Market Prospects: Further, the industry is gaining from increasing exposure to developing economies like China and India. Prospects in China are huge as regulators are attempting to raise the country’s biopharma industry to global standards. Moreover, efforts to improve the drug development process and production quality in the country are noteworthy. These factors are resulting in strong demand for instruments.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Instruments - Scientific industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #55, which places it at the top 22% 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 solid 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.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. Since Feb 28, 2021, the industry’s 2022 earnings estimates have moved up 13.2%.
Before we present a few 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 Beats Sector and S&P 500
The Zacks Instruments – Scientific industry has outperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has risen 16.6% over this period compared with the S&P 500’s increase of 11.9% and the broader sector’s decline of 1.5%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month P/E, which is a commonly used multiple for valuing scientific instrument stocks, we see that the industry is currently trading at 29.45X compared with the S&P 500’s 19.7X and the Zacks Computer and Technology sector’s 27.48X.
Over the last five years, the industry has traded as high as 36.33X, as low as 26.32X and at the median of 31.60X, as the chart below shows.
Forward 12-Month Price-to-Earnings (P/E) Ratio
2 Scientific Instruments Providers to Buy
Mettler-Toledo International: This Polaris Parkway, Columbus-based company has returned 22.5% in the past year. This Zacks Rank #2 (Buy) company is benefiting from solid momentum across its laboratory and Industrial segments. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Mettler Toledo’s strengthening presence in the Americas, Europe, Asia and the Rest of the World remains positive. Furthermore, portfolio strength, cost-cutting efforts, robust sales and marketing strategies, benefits from investments in Spinnaker sales, and field resources are contributing well. Also, a strong core industrial business is encouraging. Further, solid demand across pharmaceutical and life science markets is a tailwind.
The Zacks Consensus Estimate for Mettler-Toledo’s current-year earnings has moved up 1.6% to $38.36 per share over the past 30 days.
Price and Consensus: MTD
Bruker: This Billerica, MA-based company is benefiting from growth in its Nano Group’s microelectronics and semiconductor metrology tools.
This Zacks Rank #2 (Buy) company is riding on strong prospects for CALID Group and BioSpin. Continued growth in mass spectrometry and microbiology businesses, along with strength in the FTIR/Near IR/Raman molecular spectroscopy products lines, has been beneficial for CALID Group.
Bruker’s BioSpin's solution has been gaining adoption not only among academic and government customers but also from pharmaceutical and biotechnology companies.
Notably, the Zacks Consensus Estimate for Bruker’s 2022 earnings has risen by a penny to $2.29 per share in the past 30 days. The stock has rallied 8.9% in the past year.
Price and Consensus: BRKR