The integration of technology into healthcare products and services is paving the way for the disruptive growth of the healthcare industry. With non-emergency services now being rescheduled because of the strong vaccination drive and gradual economic reopening, companies that manufacture analytical and diagnostic devices and solutions are generating sales growth.
Rapid digital transformation and significant capital investments should facilitate the growth of the diagnostics devices segment. The global medical devices market is expected to grow at a 5.4% CAGR over the next seven years to $657.98 billion by 2028.
Furthermore, healthcare stocks often act as a hedge against inflation, given the relatively inelastic demand for healthcare services. Therefore, we believe that amid rising inflation, popular healthcare stocks Mettler-Toledo International Inc. (MTD), Laboratory Corporation of America Holdings (LH), and Bruker Corporation (BRKR) should be valuable additions to one’s portfolio.
Mettler-Toledo International Inc. (MTD)
MTD manufactures and markets precision, weighing, and analytical instruments for laboratory, industrial, packaging, logistics, and food retailing applications worldwide. The Columbus, Ohio-based company also supplies end-of-line inspection systems used in food production and packaging, pharmaceutical, and other industries. It markets its products through its direct sales force and indirect distribution channels.
On March 24, 2021, MTD completed the acquisition of PendoTECH, a pharmaceutical company that serves biopharmaceutical manufacturers and life science laboratories. This acquisition will expand MTD’s offering to include various sensors and software for measuring, monitoring, and collecting data primarily in bioprocess applications. Combining MTD’s process analytics and PendoTECH’s products and technologies has the potential to create one of the most comprehensive sensor offerings in the bioprocess market.
MTD’s net sales for its fiscal second quarter, ended June 30, 2021, increased 33.8% year-over-year to $924.35 million. The company’s gross profit came in at $536.90 million, up 34.9% from the year-ago period. Its adjusted operating profit has been reported at $255.26 million, representing a 44.5% increase from the prior-year period. MTD’s net earnings came in at $184.76 million, representing a 46% year-over-year improvement. Its adjusted EPS increased 53.1% year-over-year to $8.10. The company had 142.25 million in cash and cash equivalents as of June 30, 2021.
Analysts expect the stock’s EPS to increase 10.7% for the current quarter (ending September 30, 2021) to $7.77. MTD surpassed the Street’s EPS estimates in each of the trailing four quarters. The $882.54 million consensus revenue estimate for the current quarter represents a 9.3% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 15.5% rate per annum over the next five years. The stock has gained 50.6% over the past nine months and 8.2% over the past month. It closed yesterday’s trading session at $1511.70.
MTD’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Growth, Sentiment, Quality, and Stability. Click here to see the additional ratings for MTD (Value and Momentum). The stock is ranked #6 of 187 stocks in the Medical – Devices & Equipment industry.
Laboratory Corporation of America Holdings (LH)
Burlington, N.C.-based LH is an independent clinical laboratory company that offers a range of clinical laboratory tests and procedures used by the medical profession in core testing, patient diagnosis, and the monitoring and treatment of diseases. It also offers drug development services and provides a range of drug research and development (R&D) and market access services to biopharmaceutical companies and medical device companies worldwide.
On July 1, 2021, LH announced the availability of therascreen KRAS PCR Mutation Analysis, a companion diagnostic to identify patients with non-small cell lung cancer (NSCLC) who are eligible for treatment with LUMAKRAS, a new treatment option developed by Amgen Inc. (AMGN). Both QIAGEN (QGEN) and LH will ensure biomarker assays for KRAS are immediately available to physicians through its CAP-accredited CLIA-certified specialty labs. The therapy and this indicated use of the test as a companion diagnostic received approval from the U.S. Food and Drug Administration (FDA) in late May. The companies are likely to witness rising demand in the coming months.
In an announcement dated May 19, 2021, LH said it had expanded its drug development offering in the Asia-Pacific region with the addition of bioanalytical services in Singapore. Singapore is a crucial region for strengthening LH’s extensive global presence. This new laboratory will support the development of small and large molecular entities, while providing a complete range of regulated and non-regulated bioanalytical services. In addition, it will allow faster data turnaround for early phase trials in Asia-Pacific markets.
For its fiscal second quarter, ended June 30, 2021, LH’s revenues were $3.84 billion, representing a 38.7% increase from the prior-year period. The company’s gross profit increased 66.3% year-over-year to $1.26 billion. Its adjusted operating income has been reported at $839.90 million for the quarter, up 120.6% from the prior-year period. While its adjusted net income increased 140% year-over-year to $602.40, its adjusted EPS increased 138.5% year-over-year to $6.13. The company had $1.96 billion in cash and cash equivalents as of June 30, 2021.
For the current year, analysts expect LH’s revenue to be $14.73 billion, representing a 5.4% rise from the prior-year period. The stock has surpassed consensus EPS estimates in each of the trailing four quarters. LH has rallied 47.7% over the past nine months and 6.8% over the past month. It ended yesterday’s trading session at $294.66.
LH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Growth, Quality, and Value. We also have graded LH for Stability, Sentiment, and Momentum. Click here to access all LH ratings. LH is ranked #4 of 55 stocks in the Medical – Diagnostics/Research industry.
Bruker Corporation (BRKR)
BRKR manufactures and distributes proprietary life science systems and advanced materials research tools based on X-ray technology platforms. The company also sells a range of field analytical systems for substance detection and pathogen identification. BRKR is based in Billerica, Mass.
On June 21, BRKR launched a new VIP-HESI ion source and new integrated software tools to increase confidence in 4D-Metabolomics and 4D-Lipidomics workflows. BRKR’s collaborators are making major progress in 4D-Metabolomics by leveraging measured collision cross sections (CCS). These CCS values will be useful in the annotation of unknown compounds and bring a step-change for untargeted metabolomics and lipidomics research.
BRKR announced on June 7 the launch of the FluoroTypeSARS-CoV-2 varID Q assay, which detects SARS-CoV-2 mutations enabling laboratories to differentiate many major viral variants routinely on all positive samples. Providing improved statistics for epidemiology, with shorter (overnight) time-to-result (TTR) and lower costs than NGS, this assay is likely to witness widespread recognition in the industry in the near term.
For its fiscal fourth quarter, ended March 31, 2021, BRKR’s revenue increased 30.8% year-over-year to $554.70 million. The company’s non-GAAP gross profit came in at $284.30 million, up 43.5% from the prior-year period. Its non-GAAP operating income has been reported at $102.20 million, representing a 217.4% year-over-year improvement. BRKR’s non-GAAP net income came in at $66.70 million, up 200.5% from the prior-year period. Its non-GAAP EPS increased 214.3% year-over-year to $0.44. As of March 31, 2021, the company had $696.80 million in cash and cash equivalents. A $0.37 consensus EPS estimate for the current quarter, ending September 30, 2021, represents a 4.8% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect BRKR’s revenue to improve 11.6% year-over-year to $570.88 million for the current quarter. The stock’s EPS is expected to grow at a 16.5% rate per annum over the next five years.
The stock has gained 95.1% over the past nine months and 7.8% over the past six months. It ended yesterday’s trading session at $81.90.
It’s no surprise that BRKR has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has an A grade for Growth, and a B grade for Value, Stability, Sentiment, and Quality. Click here to see the additional ratings for BRKR’s Momentum. The stock is ranked #1 in the Medical – Diagnostics/Research industry.
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MTD shares were trading at $1,491.19 per share on Friday afternoon, down $20.51 (-1.36%). Year-to-date, MTD has gained 30.84%, versus a 17.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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