Increased capital investments and rapid technology integration aided the medical devices industry’s recovery last year. Furthermore, the rising prevalence of chronic diseases, and an emphasis on early diagnosis and treatment, are facilitating the industry’s rebound.

The adoption of advanced technologies such as artificial intelligence (AI), 3D printing, and the development of other smart gadgets are positioning the industry for long-term growth. The global medical device market is expected to reach $657.98 billion by 2028, registering a CAGR of 5.4%.

Prominent medical devices companies Medtronic plc (MDT) and Zimmer Biomet Holdings Inc. (ZBH) have witnessed significant price declines over the past few months. However, based on their solid fundamentals, we think they could gain considerably in the near term.

Medtronic plc (MDT)

MDT develops, produces, distributes, and sells device-based medical therapies to hospitals, physicians, clinicians, and patients worldwide. The company operates through four segments: Cardiovascular Portfolio; Neuroscience Portfolio; Medical-Surgical Portfolio; and Diabetes Operating Unit.

Last month, the U.S. Food and Drug Administration (FDA) awarded 510(k) approval for MDT’s INVOSTM 7100 cerebral/somatic oximetry device for children aged upto 18 years. The INVOS system detects vital signals to help pediatric doctors make time-critical choices about hemodynamic management, ventilation, and resuscitation for premature infants, neonates, children, and other patients.

For the second quarter ended October 29, 2021, MDT’s net sales increased 2.6% from the year-ago value to $7.85 billion. Its operating income grew 68.1% year-over-year to $1.56 billion. Its net income surged 168.1% from the year-ago value to $1.31 billion, while its EPS increased 169.4% from the prior-year quarter to $0.97.

The consensus EPS estimate of $5.69 for fiscal 2022 represents a 28.2% increase year-over-year. The revenue is expected to increase 5.3% in fiscal 2023. The stock has declined 17.5% over the past three months and 3.1% over the past month.

It is no surprise that MDT has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree. The stock also has a B grade for Growth, Value, and Stability. In the Medical – Devices & Equipment industry, MDT is ranked #17 of 169 stocks.

Beyond the POWR Ratings grades I have just highlighted, you can view the MDT ratings for Sentiment, Quality, and Momentum.

Zimmer Biomet Holdings Inc. (ZBH)

ZBH and its subsidiaries research, manufacture, and sell musculoskeletal healthcare products and solutions internationally. The company’s products and solutions are used to treat patients who have bone, joint, or supporting soft tissue illnesses or injuries. It caters to orthopedic surgeons, neurosurgeons, oral surgeons, dentists, hospitals, stocking distributors, healthcare dealers, and other professionals.

ZBH’s revenue came in at $1.92 billion for the third quarter ended September 30, 2021. The company reported an operating income of $214.9 million, while its net income came in at $145.8 million for this period. Its EPS amounted to $0.69 over this period.

The company’s EPS is expected to grow 30.5% year-over-year to $7.4 in fiscal 2021. Analysts expect ZBH’s revenue to increase 12% year-over-year to $7.87 billion in fiscal 2021. Although the stock has declined 21% over the past six months, it has gained 6.2% over the past month.

ZBH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. ZBH also has a B grade for Value. The stock is ranked #38 in the same industry.

Beyond the POWR Ratings grades I have just highlighted, you can see the ZBH ratings for Growth, Quality, Sentiment, Stability, and Momentum.

MDT shares were trading at $106.60 per share on Tuesday afternoon, up $0.50 (+0.47%). Year-to-date, MDT has gained 3.04%, versus a 0.62% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

More Resources for the Stocks in this Article