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3 Instruments Stocks to Watch From a Prospering Industry
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The Zacks Instruments - Scientific industry is benefiting from increasing healthcare spending driven by aging demography, and continued innovation in the pharma and life sciences end-markets. Higher demand for generic drugs and biosimilars is driving growth for scientific tool and apparatus providers. Industry participants like Harvard Bioscience (HBIO - Free Report) , Mettler-Toledo International (MTD - Free Report) and Waters (WAT - Free Report) are gaining from growing testing needs of newer biological drugs, as well as batteries used in applications in EVs. Increased scrutiny of per- and polyfluoroalkyl substances (PFAS) in food and water is driving the need for instruments. Moreover, the increasing demand for automated solutions that helps in ensuring compliance is noteworthy. However, the industry continues to suffer from challenging macroeconomic conditions and the ill effects of the ongoing Russia-Ukraine war.
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 industry participants are under stringent regulatory scrutiny worldwide. They have to adhere to the U.S. Food and Drug Administration (FDA) and the U.S. Environmental Protection Agency (EPA) 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 Instruments-Scientific Industry's Future
End-Market Demand Strong: 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. Pharma companies are focused on rapidly growing areas like proteomics and phenomics, biopharma and applied, microbiology and diagnostics, and neuroscience and cell microscopy. This creates significant demand for the instruments provided by industry participants.
Aging Demography Driving Spending: Socioeconomic factors like aging demography and increasing environmental regulations are fueling the demand for scientific measurement solutions. Robust worldwide healthcare spending is another major growth driver.
Emerging Market Prospects Solid: The industry is gaining from increasing exposure to developing economies like China and India. Prospects in China are huge as regulators attempt to raise the country’s biopharma industry to global standards. Efforts to improve the country’s drug development process and production quality are noteworthy. Robust investments in segments like lithium-ion batteries and biopharma are driving prospects. The growing demand for automation is a long-term driver in China. These factors result in strong demand for instruments.
Zacks Industry Rank Indicates Bullish Prospects
The Zacks Instruments - Scientific industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #62, which places it in the top 25% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform 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 a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are optimistic about this group’s earnings growth potential. Since Dec 31, 2022, the industry’s 2023 earnings estimates have moved up 1.3%.
Given the bullish near-term outlook, there are a few stocks in the industry worth watching. Before we present those 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 Lags Sector and S&P 500
The Zacks Instruments – Scientific industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has gained 7% over this period compared with the S&P 500’s increase of 19% and the broader sector’s jump of 28.6%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the 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 24.66X compared with the S&P 500’s 19.39X and the Zacks Computer and Technology sector’s 25.36X.
Over the last five years, the industry has traded as high as 40.64X and as low as 23.96X, with a median of 26.88X, as the charts below show.
Forward 12-Month Price-to-Earnings (P/E) Ratio
3 Scientific Instruments Providers to Watch
Harvard Bioscience: This Zacks Rank #2 (Buy) company is benefiting from an expanding portfolio, thanks to new solutions like the BTX electroporation system configured for bio-production, as well as two new cellular products. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Harvard expects price and volume growth to benefit its top line in the near term. For 2023, it now expects mid-single-digit revenue growth.
Shares of this Holliston, MA-based company have returned 96.4% in the year-to-date period. The Zacks Consensus Estimate for HBIO’s current-year earnings has been steady at 23 cents per share in the past 30 days.
Price and Consensus: HBIO
Mettler-Toledo: This Zacks Rank #3 (Hold) company is benefiting from the solid momentum across its laboratory and industrial segments.
Mettler-Toledo’s strengthening presence in the Americas, Europe, Asia and the Rest of the World is a positive. Portfolio strength, cost-cutting efforts, robust sales and marketing strategies, benefits from investments in Spinnaker sales, and field resources are contributing well. A strong core industrial business is encouraging. Solid demand across pharmaceutical and life science markets is another tailwind for MTD.
Shares of this Polaris Parkway, Columbus, OH-based company have declined 7.5% in the year-to-date period. The Zacks Consensus Estimate for MTD’s current-year earnings has climbed a penny to $43.88 per share in the past 30 days.
Price and Consensus: MTD
Waters: This Milford, MA-based company is an analytical instrument manufacturer. Solid momentum across new product lines like BioAccord and Cyclic IMS is a positive. WAT’s strengthening presence in the industrial and pharmaceutical end markets is a tailwind.
Further, growing investments in LC, LC-MS and chemistry categories are aiding this Zacks Rank #3 company to gain traction in the large molecule market.
The Zacks Consensus Estimate for Waters’ current-year earnings has been steady at $12.58 per share over the past 30 days. WAT’s shares have declined 21.7% year to date.
Price and Consensus: WAT
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3 Instruments Stocks to Watch From a Prospering Industry
The Zacks Instruments - Scientific industry is benefiting from increasing healthcare spending driven by aging demography, and continued innovation in the pharma and life sciences end-markets. Higher demand for generic drugs and biosimilars is driving growth for scientific tool and apparatus providers. Industry participants like Harvard Bioscience (HBIO - Free Report) , Mettler-Toledo International (MTD - Free Report) and Waters (WAT - Free Report) are gaining from growing testing needs of newer biological drugs, as well as batteries used in applications in EVs. Increased scrutiny of per- and polyfluoroalkyl substances (PFAS) in food and water is driving the need for instruments. Moreover, the increasing demand for automated solutions that helps in ensuring compliance is noteworthy. However, the industry continues to suffer from challenging macroeconomic conditions and the ill effects of the ongoing Russia-Ukraine war.
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 industry participants are under stringent regulatory scrutiny worldwide. They have to adhere to the U.S. Food and Drug Administration (FDA) and the U.S. Environmental Protection Agency (EPA) 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 Instruments-Scientific Industry's Future
End-Market Demand Strong: 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. Pharma companies are focused on rapidly growing areas like proteomics and phenomics, biopharma and applied, microbiology and diagnostics, and neuroscience and cell microscopy. This creates significant demand for the instruments provided by industry participants.
Aging Demography Driving Spending: Socioeconomic factors like aging demography and increasing environmental regulations are fueling the demand for scientific measurement solutions. Robust worldwide healthcare spending is another major growth driver.
Emerging Market Prospects Solid: The industry is gaining from increasing exposure to developing economies like China and India. Prospects in China are huge as regulators attempt to raise the country’s biopharma industry to global standards. Efforts to improve the country’s drug development process and production quality are noteworthy. Robust investments in segments like lithium-ion batteries and biopharma are driving prospects. The growing demand for automation is a long-term driver in China. These factors result in strong demand for instruments.
Zacks Industry Rank Indicates Bullish Prospects
The Zacks Instruments - Scientific industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #62, which places it in the top 25% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform 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 a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are optimistic about this group’s earnings growth potential. Since Dec 31, 2022, the industry’s 2023 earnings estimates have moved up 1.3%.
Given the bullish near-term outlook, there are a few stocks in the industry worth watching. Before we present those 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 Lags Sector and S&P 500
The Zacks Instruments – Scientific industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has gained 7% over this period compared with the S&P 500’s increase of 19% and the broader sector’s jump of 28.6%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the 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 24.66X compared with the S&P 500’s 19.39X and the Zacks Computer and Technology sector’s 25.36X.
Over the last five years, the industry has traded as high as 40.64X and as low as 23.96X, with a median of 26.88X, as the charts below show.
Forward 12-Month Price-to-Earnings (P/E) Ratio
3 Scientific Instruments Providers to Watch
Harvard Bioscience: This Zacks Rank #2 (Buy) company is benefiting from an expanding portfolio, thanks to new solutions like the BTX electroporation system configured for bio-production, as well as two new cellular products. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Harvard expects price and volume growth to benefit its top line in the near term. For 2023, it now expects mid-single-digit revenue growth.
Shares of this Holliston, MA-based company have returned 96.4% in the year-to-date period. The Zacks Consensus Estimate for HBIO’s current-year earnings has been steady at 23 cents per share in the past 30 days.
Price and Consensus: HBIO
Mettler-Toledo: This Zacks Rank #3 (Hold) company is benefiting from the solid momentum across its laboratory and industrial segments.
Mettler-Toledo’s strengthening presence in the Americas, Europe, Asia and the Rest of the World is a positive. Portfolio strength, cost-cutting efforts, robust sales and marketing strategies, benefits from investments in Spinnaker sales, and field resources are contributing well. A strong core industrial business is encouraging. Solid demand across pharmaceutical and life science markets is another tailwind for MTD.
Shares of this Polaris Parkway, Columbus, OH-based company have declined 7.5% in the year-to-date period. The Zacks Consensus Estimate for MTD’s current-year earnings has climbed a penny to $43.88 per share in the past 30 days.
Price and Consensus: MTD
Waters: This Milford, MA-based company is an analytical instrument manufacturer. Solid momentum across new product lines like BioAccord and Cyclic IMS is a positive. WAT’s strengthening presence in the industrial and pharmaceutical end markets is a tailwind.
Further, growing investments in LC, LC-MS and chemistry categories are aiding this Zacks Rank #3 company to gain traction in the large molecule market.
The Zacks Consensus Estimate for Waters’ current-year earnings has been steady at $12.58 per share over the past 30 days. WAT’s shares have declined 21.7% year to date.
Price and Consensus: WAT
