The resurgence of COVID-19 cases across several parts of the world has been driving the diagnosis and research industry’s growth. Furthermore, according to the CDC, six in 10 Americans live with at least one chronic disease, such as heart disease, stroke, cancer, or diabetes. So, rising chronic disorders are expected to boost the industry’s prospects.
Also, the application of artificial intelligence (AI) in the industry is expected to drive further growth. According to a Grand View Research report, the use of AI in the diagnostics market is expected to grow at a 32.8% CAGR over the next seven years.
Given this backdrop, we think it could be wise to bet on fundamentally strong diagnostics and research stocks Agilent Technologies, Inc. (A), Mettler-Toledo International Inc. (MTD), Laboratory Corporation of America Holdings (LH), and Waters Corporation (WAT).
Agilent Technologies, Inc. (A)
Operating for more than two decades, A functions primarily through Life Sciences and Applied Markets, the Diagnostics, Genomics, and the Agilent CrossLab segments. In addition, its life sciences and applied markets segment offer application-focused solutions, including instruments and software. A is based in Santa Clara, Calif.
A signed a worldwide distribution agreement with Visiopharm on September 2, enabling it to co-market Visiopharm’s portfolio of CE-IVD marked AI-driven precision pathology software. The agreement is expected to help expand the company’s product portfolio in the growing digital pathology market.
A’s net revenue increased 25.8% year-over-year to $1.59 billion in its fiscal third quarter, ended July 31, 2021. Its income from operations came in at $336 million, up 46.1% year-over-year. While its non-GAAP net income increased 38.7% year-over-year to $337 million, its non-GAAP EPS came in at $1.10, up 41% year-over-year.
Analysts expect A’s revenue and EPS to increase 18.4% and 31.4%, respectively, year-over-year to $6.32 billion and $4.31 in its fiscal year 2021. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 45.2% in price to close yesterday’s trading session at $172.08.
A’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
A has a B grade for Value, Growth, Stability, Sentiment, and Quality. Within the Medical-Diagnostics/Research industry, it is ranked #2 of 58 stocks. Click here to see the additional POWR Rating for Momentum.
Note that A is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Mettler-Toledo International Inc. (MTD)
Columbus, Ohio-based MTD manufactures and supplies precision instruments and services, such as weighing instruments for laboratory, industrial, packaging, logistics, and food retailing applications. The company operates in five segments: U.S. Operations; Swiss Operations; Western European Operations; Chinese Operations; and Other.
MTD acquired PendoTECH in March 2021. PendoTECH is a manufacturer and distributor of single-use sensors, transmitters, control systems, and software for measuring, monitoring, and data collection primarily in bioprocess applications. Olivier Filliol, MTD’s President and CEO, said, “PendoTECH is an excellent strategic fit as it expands our offering to include various sensors, including pressure, which is an important and common control parameter in downstream and upstream bioprocess applications.”
MTD’s total revenues increased 33.8% year-over-year to $924.35 million for the second quarter, ended June 30, 2021. Its gross profit increased 34.9% year-over-year to $536.90 million. Also, its net earnings increased 46% year-over-year to $184.76 million, while its EPS came in at $7.85, representing a 50.4% year-over-year rise.
For its fiscal year 2021, MTD’s revenue and EPS are expected to grow 18.9% and 28.1%, respectively, year-over-year to $3.67 billion and $32.96. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 59.8% in price to close yesterday’s trading session at $1,555.48.
It’s no surprise that MTD has an overall A rating, which equates to a Strong Buy in our POWR Rating system. In addition, it has an A grade for Quality, and a B grade for Stability and Growth.
Laboratory Corporation of America Holdings (LH)
Life sciences company LH offers various tests, such as gene-based and esoteric testing, and advanced tests target specific diseases. The company operates in two segments: Labcorp Diagnostics (Dx) and Labcorp Drug Development (DD). LH is headquartered in Burlington, N.C.
On September 13, LH acquired select operating assets and intellectual property (IP) from Myriad Genetics’ autoimmune business unit, including the Vectra rheumatoid arthritis (RA) assay. The acquisition is expected to help expand the company’s reach in the rheumatology domain.
For the second quarter, ended June 30, 2021, LH’s total revenues increased 38.7% year-over-year to $3.84 billion. Its operating income came in at $704.10 million, up 136.5% year-over-year. Its net income was $467.40 million, representing a 101.8% year-over-year rise. Also, its EPS came in at $4.76, up 100.8% year-over-year.
LH’s revenue is expected to grow 8.2% year-over-year to $15.12 billion in its fiscal year 2021. Over the past year, the stock has gained 63.9% in price to close yesterday’s trading session at $297.46.
LH’s POWR ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Value, Sentiment, and Quality.
Waters Corporation (WAT)
Analytical instrument manufacturer WAT designs, manufactures, sells, and services high- and ultra-performance liquid chromatography, mass spectrometry (MS) technology systems, and support products. It operates through two segments: Waters and TA. WAT is based in Milford, Mass.
In June, WAT expanded its partnership with Singapore-based Bioprocessing Technology Institute (BTI) for data analytics research purposes. David Curtin, WAT’s Vice President of Asia Pacific, said, “Our work with BTI spans multiple successful collaborations in the realm of glycomics and bioprocessing research.”
WAT’s revenue increased 31.1% year-over-year to $681.65 million for its fiscal second quarter, ended July 3, 2021. The company’s operating income came in at $196.42 million, up 26.6% year-over-year. Its net income increased 36.1% year-over-year to $167.29 million. Also, its EPS increased 35.9% from the same period last year to $2.69.
Analysts expect WAT’s revenue to be $2.76 billion in its fiscal year 2021, representing a 16.8% year-over-year rise. In addition, the company’s EPS is expected to increase 17.9% year-over-year to $10.67 in the current year. Also, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 97.7% in price to close yesterday’s trading session at $403.21.
WAT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
In addition, WAT has a B grade for Quality. Within the Medical-Diagnostics/Research industry, it is ranked #7. Also, click here to see the additional POWR Ratings for Stability, Momentum, Growth, Value, and Sentiment for WAT.
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A shares were trading at $173.26 per share on Tuesday morning, up $1.18 (+0.69%). Year-to-date, A has gained 46.88%, versus a 19.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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