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2 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 Mettler-Toledo International (MTD - Free Report) and Bruker (BRKR - Free Report) are gaining from the growing testing needs of newer biological drugs. The increasing demand for automated solutions that help in ensuring compliance is encouraging. AI continues to drive demand for semiconductor metrology and advanced packaging tools. However, the industry continues to suffer from challenging macroeconomic conditions and reduced demand in China. The continuing war in Ukraine and the conflict in the Middle East increases the risk of rising energy prices and sluggishness in the European economy, which are headwinds.
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 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 and the U.S. Environmental Protection Agency 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
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. 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 a 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 #103, which places it in the top 41% 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 two to one.
The industry’s position 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 May 31, 2024, the industry’s earnings estimates have moved up 0.3%.
Given the bullish near-term outlook, there are a few stocks in the industry worth watching. But 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 8.5% over this period compared with the S&P 500’s growth of 18.6% and the broader sector’s return of 25.9%.
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 25.64X compared with the S&P 500’s 20.76X and the Zacks Computer and Technology sector’s 25.46X.
Over the last five years, the industry has traded as high as 30.17X and as low as 22.03X, with a median of 26.23X, as the charts below show.
Forward 12-Month Price-to-Earnings (P/E) Ratio
2 Scientific Instruments Providers to Watch
Mettler-Toledo: This Zacks Rank #3 (Hold) company is benefiting from improving demand across the Laboratory segment. The solid execution of its Spinnaker and SternDrive programs is likely to aid top-line growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Mettler-Toledo’s portfolio strength, cost-cutting efforts, margin and productivity initiatives, and robust sales and marketing strategies are driving prospects.
Shares of this Polaris Parkway, Columbus-based company have gained 18.8% in the year-to-date period. The Zacks Consensus Estimate for Mettler-Toledo’s current-year earnings has increased 0.12% to $40.18 per share in the past 30 days.
Price and Consensus: MTD
Bruker: This Billerica, MA-based company is riding on its innovative portfolio. It continues on its trajectory of delivering excellent organic growth. Acquisitions, including Bruker Cellular Analysis (formerly PhenomeX), ELITech and Chemspeed, are expected to drive top-line growth.
The Zacks Consensus Estimate for Bruker’s current-year earnings has been unchanged at $2.66 per share over the past 30 days. Shares of this Zacks Rank #3 company have declined 10.3% year to date.
Price and Consensus: BRKR
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2 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 Mettler-Toledo International (MTD - Free Report) and Bruker (BRKR - Free Report) are gaining from the growing testing needs of newer biological drugs. The increasing demand for automated solutions that help in ensuring compliance is encouraging. AI continues to drive demand for semiconductor metrology and advanced packaging tools. However, the industry continues to suffer from challenging macroeconomic conditions and reduced demand in China. The continuing war in Ukraine and the conflict in the Middle East increases the risk of rising energy prices and sluggishness in the European economy, which are headwinds.
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 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 and the U.S. Environmental Protection Agency 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
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. 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 a 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 #103, which places it in the top 41% 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 two to one.
The industry’s position 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 May 31, 2024, the industry’s earnings estimates have moved up 0.3%.
Given the bullish near-term outlook, there are a few stocks in the industry worth watching. But 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 8.5% over this period compared with the S&P 500’s growth of 18.6% and the broader sector’s return of 25.9%.
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 25.64X compared with the S&P 500’s 20.76X and the Zacks Computer and Technology sector’s 25.46X.
Over the last five years, the industry has traded as high as 30.17X and as low as 22.03X, with a median of 26.23X, as the charts below show.
Forward 12-Month Price-to-Earnings (P/E) Ratio
2 Scientific Instruments Providers to Watch
Mettler-Toledo: This Zacks Rank #3 (Hold) company is benefiting from improving demand across the Laboratory segment. The solid execution of its Spinnaker and SternDrive programs is likely to aid top-line growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Mettler-Toledo’s portfolio strength, cost-cutting efforts, margin and productivity initiatives, and robust sales and marketing strategies are driving prospects.
Shares of this Polaris Parkway, Columbus-based company have gained 18.8% in the year-to-date period. The Zacks Consensus Estimate for Mettler-Toledo’s current-year earnings has increased 0.12% to $40.18 per share in the past 30 days.
Price and Consensus: MTD
Bruker: This Billerica, MA-based company is riding on its innovative portfolio. It continues on its trajectory of delivering excellent organic growth. Acquisitions, including Bruker Cellular Analysis (formerly PhenomeX), ELITech and Chemspeed, are expected to drive top-line growth.
The Zacks Consensus Estimate for Bruker’s current-year earnings has been unchanged at $2.66 per share over the past 30 days. Shares of this Zacks Rank #3 company have declined 10.3% year to date.
Price and Consensus: BRKR