Medical devices comprise equipment required in the diagnosis, cure and monitoring of medical conditions. The medical devices industry also includes in-vitro diagnostic devices, dental equipment, diagnostic imaging equipment, ophthalmic devices, hospital supplies, and other cardiovascular devices.

The industry suffered at  the beginning of the COVID-19  pandemic as worldwide lockdowns significantly affected its supply chain. Also, with the focus of medical services trained almost exclusively on the pandemic, there was limited activity in elective surgeries and procedural treatments. However, diagnostic imaging equipment saw unabated strong demand.

Gradually, things have begun looking up for the industry. Technological advancements, the expansion of healthcare spending and a rising awareness about cures for various chronic diseases are likely to underpin the industry’s continued growth. The Business Research Company projects the global medical devices market to recover and grow at a CAGR of 6.1% from 2021, hitting $603.5 billion in 2023.

Medical devices are an indispensable part of the overall healthcare sector and, as such, those products should see resilient high demand. Medtronic plc. (MDT), Stryker Corporation (SYK), Edwards Lifesciences Corporation (EW), and Zimmer Biomet Holdings, Inc. (ZBH) are four medical devices companies that are well-positioned to benefit from the industry’s potential growth.

Medtronic plc. (MDT)

MDT is involved in the development, manufacturing, and distribution of  device-based medical therapies to hospitals, physicians, clinicians, and patients worldwide.  Cardiac and Vascular Group, Minimally Invasive Therapies Group, Restorative Therapies Group, and Diabetes Group are the four segments through which it operates.

MDT recently announced a first-of-its-kind Adaptive Deep Brain Stimulation (aDBS) Trial in Parkinson’s Disease Patients. Adaptive deep brain stimulation is an investigational feature of the Percept™ PC device that could be enabled if approved. A randomized study will take place across 12 study sites at leading Movement Disorders research centers in the United States, Europe, and Canada.

During the second quarter ended October 31, 2020, MDT’s revenue declined 0.8% year-over-year to $7.6 billion. Its non-U.S. developed market revenue rose 6%, while its U.S. revenue slipped 2%. Its  Emerging markets’ revenue decreased 9%. Meanwhile, its EPS dropped 22% to $1.02.

The Street estimates revenue for the quarter ending January 2021 to be $7.8 billion, representing  a 0.8% increase year-over-year. Meanwhile, its EPS is likely to rise at the rate of 10.3% over the next five years.

MDT has declined 3.7% in the past year to close Friday’s trading session at $116.58. The stock has climbed 91.6% during the past six months.

How does MDT stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

B for Industry Rank

A for Overall POWR Rating

The stock is also ranked #1 of 186 stocks in the Medical – Devices & Equipment Industry.

Stryker Corporation (SYK)

SYK operates a medical technology company through three segments: Orthopedics, MedSurg, and Neurotechnology and Spine. The company sells its products to doctors, hospitals, and other healthcare facilities through its subsidiaries, branches, and third-party dealers and distributors in nearly 75 countries.

Earlier this month, SYK announced the acquisition of OrthoSensor, Inc., a leader in the digital evolution of musculoskeletal care and sensor technology for total joint replacement. The company’s advancements in sensor technology, coupled with expanded data analytics and increasing computational power, will strengthen SYK’s digital ecosystem.

SYK’s revenue during the third quarter ended September 30, 2020 climbed 4.2% year-over-year to $3.7 billion, led by growth in the Neurotechnology and Spine and Orthopedics segment. EPS for the quarter grew 32.5% to $1.63.

Analysts expect revenue for the quarter ended December 31, 2020 to rise 4.9% year-over-year to $4.3 billion. EPS for the quarter is likely to rise 2.4% to $2.55.

SYK ended Friday’s trading session at $239.93, climbing 10.5% over the past year. During the past six months, the stock has gained 23.1%.

SYK is rated “Strong Buy” according to the POWR Ratings, with an “A” for Trade Grade, Buy & Hold Grade, and a “B” for Peer Grade, and Industry Rank. It is currently ranked #2 of 186 stocks in the Medical – Devices & Equipment Industry.

Edwards Lifesciences Corporation (EW)

EW provides products and technologies for structural heart disease, critical care and surgical monitoring in the United States and globally. The company also offers transcatheter heart valve replacement products for the minimally invasive replacement of heart valves, and transcatheter heart valve repair and  replacement products to treat mitral and tricuspid valve diseases.

During the third quarter ended September 30, 2020, EW’s net sales climbed 4.3% year-over-year to $1.1 billion. Its EPS rose to $0.52 from $0.44 posted in the same period last year. Transcatheter Aortic Valve Replacement (TAVR) global sales climbed 6%. TMTT clinical trials have now begun enrolling at pre-COVID levels.

The consensus revenue estimate for the quarter ended December 31, 2020 is $1.2billion, representing a 1.2% year-over-year increase. Its EPS is expected to grow 8.2% to $0.53.

EW ended Friday’s trading session at $85.52, gaining 5.6% over the past year. Over the past six months, the stock has returned 9.8%.

EW POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade, and Buy & Hold Grade, and a “B” for Industry Rank. It is currently ranked #66 of 186 stocks in the Medical – Devices & Equipment Industry.

Zimmer Biomet Holdings, Inc. (ZBH)

ZBH is involved in the design, manufacture, and sales of musculoskeletal healthcare products and solutions in the Americas, the Middle East, Europe Africa, and the Asia Pacific. Spine; Office Based Technologies; Craniomaxillofacial and Thoracic; and Dental are the four segments through which the company operates.

During the third quarter ended September 30, 2020, ZBH’s net sales climbed 2% year-over-year to $1.9 billion. Its EPS for the quarter declined to $1.16 from $2.08 posted in the same period last year.

Analysts expect revenue for the quarter ended December 30, 2020 to decline 1.4% year-over-year to $2.1 billion. Meanwhile, its EPS for the quarter is likely to expand at the rate of 3.5% per annum over the next five years.

ZBH ended Friday’s trading session at $161.01, rising 6.6% over the past year. During the past six months, the stock has gained 21%.

ZBH is rated “Strong Buy” in our POWR Ratings, with an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and a “B” for Industry Rank. It is currently ranked #6 of 186 stocks in the Medical – Devices & Equipment Industry.

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MDT shares were trading at $116.90 per share on Monday afternoon, up $0.32 (+0.27%). Year-to-date, MDT has declined -0.20%, versus a 2.81% rise in the benchmark S&P 500 index during the same period.

About the Author: Namrata Sen Chanda

Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...

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