The Zacks Medical – Products 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 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 Abbott Laboratories (ABT), Baxter International Inc. (BAX), Boston Scientific Corporation (BSX), Zimmer Biomet Holdings, Inc. (ZBH) and Perrigo Company plc (PRGO).
Let us take a look at the three major themes in the 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) 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.
- Growing R&D Expenditure: In 2019, top MedTech companies increased R&D spending across the board. This trend is likely to continue in 2020 as well. Higher R&D expenditure is putting more MedTech products into a faster approval cycles, thereby leading to more new products being marketed. Per a report by EvaluateMedTech, published by Medical Device and Diagnostic Industry, Medtronic (MDT) is likely to be the biggest spender (spending $2.5 billion by 2020). This constitutes 8.5% of the total expenditure the entire MedTech industry is estimated to spend in 2020.
- 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 #75, which places it in the top 30% 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’s Stock Market 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 increased 0.2% over this period compared with the S&P 500’s growth of 11.1%. However, the broader sector has declined 3.9%.
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 23.41X compared with the sector’s 19.99X and the S&P 500’s 17.81X.
Over the past five years, the industry has traded as high as 25.36X and as low as 17.01X, with the median being at 19.58X as the charts show below.
Price-to-Earnings Forward Twelve Months (F12M)
Price-to-Earnings Forward Twelve Months (F12M)
Technologies like cloud computing, AI and Internet of Medical Things (IoMT) can simplify the healthcare delivery process and align it with changing customer needs. However, as digital health gains momentum, companies need to continually invest in security tools and services to detect risks (cybersecurity being one of the primary concerns) and keep them in check.
Nonetheless, given the rising medical awareness and economic prosperity, emerging economies have been witnessing solid demand for medical products and the momentum is expected to continue in the near term as well.
Here, we present three stocks that either have a Zacks Rank #1 (Strong Buy) or 2 (Buy), which investors can take a look at. These stocks are well positioned to grow in the days ahead. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hill-Rom Holdings, Inc. (HRC)
Hill-Rom Holdings is one of the leading global medical device companies. The company offers medical surgical beds, intensive care unit beds, and bariatric patient beds, lifts and other devices, non-invasive therapeutic products and surfaces, and information technologies and software solutions, and sells equipment service contracts for its capital equipment. The stock carries a Zacks Rank of 2.
For this Batesville, IN-based company, the Zacks Consensus Estimate for 2020 revenues indicates year-over-year improvement of 1%. It has a trailing-four quarter positive earnings surprise of 2.9%, on average.
Price and Consensus: HRC
ResMed Inc. (RMD)
ResMed provides holds a dominant position as designer, manufacturer, and distributor in the worldwide market for generators, masks, and related accessories for the treatment of sleep-disordered breathing (SDB) and other respiratory disorders. SDB includes obstructive sleep apnea (OSA) and other respiratory disorders that occur during sleep. The company sports a Zacks Rank #1.
For this San Diego, CA-based company, the Zacks Consensus Estimate for 2020 revenues suggests year-over-year improvement of 11.3%. It has a trailing-four quarter positive earnings surprise of 8.9%, on average.
Price and Consensus: RMD
Stryker Corporation (SYK)
Aphria Inc. is one of the world’s largest medical device companies operating in the global orthopedic market. The company has three business segments: Orthopaedics, MedSurg, and Neurotechnology & Spine. The company carries a Zacks Rank #2.
For this Kalamazoo, MI-based company, the Zacks Consensus Estimate for 2020 revenues indicates year-over-year improvement of 7.2%. It has a trailing-four quarter positive earnings surprise of 1.5%, on average.
Price and Consensus: SYK
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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Zimmer Biomet Holdings, Inc. (ZBH) : Free Stock Analysis Report
Stryker Corporation (SYK) : Free Stock Analysis Report
ResMed Inc. (RMD) : Free Stock Analysis Report
Perrigo Company plc (PRGO) : Free Stock Analysis Report
Medtronic PLC (MDT) : Free Stock Analysis Report
Intuitive Surgical, Inc. (ISRG) : Free Stock Analysis Report
Hill-Rom Holdings, Inc. (HRC) : Free Stock Analysis Report
Boston Scientific Corporation (BSX) : Free Stock Analysis Report
Baxter International Inc. (BAX) : Free Stock Analysis Report
Abbott Laboratories (ABT) : Free Stock Analysis Report
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