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Going by the second-quarter fiscal 2016 financial figures, the Medical sector has come up with an impressive earnings beat ratio of 88% and revenue beat ratio of 82%. Notably, the sector also reported earnings growth of 5% on a revenue growth of 9.2% on a year over year basis.
We particularly note the stellar year-over-year revenue growth that reflects robust performance by the sector, especially the medical devices stocks.
The highly resilient Medical device industry is expected to continue to drive investor returns, primarily based on positive demographic trends.
In fact, historical trends for the sector has been impressive too, as an analysis by the S&P Global deciphers that U.S. health care costs in the commercial market grew 6.5% in 2015, a 50% higher rate of improvement than that recorded in the prior year.
Moreover, according to Centers for Medicare and Medicaid Services’ (CMS) projection, total U.S. healthcare spending is expected to grow 5.8% on an average annually through 2025, courtesy of faster projected economic growth and an aging population.
We believe that higher spending bodes particularly well for the sector, especially for the medical devices providers.
We have picked five stocks that have rallied on the improvement in the medical device space. Notably, these stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Intuitive Surgical Inc. (ISRG - Free Report) – Based in Sunnyvale, CA, Intuitive Surgical designs, manufactures and markets da Vinci surgical systems, and related instruments and accessories. Notably, this Zacks Rank #2 stock has a strong year-to-date return of 26.7%.
We also note that Intuitive Surgical’s results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 18.05%.
However, estimate revisions for the current year and fiscal 2017 remained constant at $18.01 and $20.9, respectively, over the last 30 days.
Natus Medical Inc. – Pleasanton, CA-based Natus Medical designs, manufactures, and markets newborn care and neurology healthcare products and services worldwide.
We note results of this Zacks Rank #2 stock, compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 8.7%.
However, estimate revisions for the last 30 days stands at $1.69 for the current year.
CryoLife Inc. – Based in Kennesaw, GA, CryoLife, is the leader in the development and commercialization of implantable living human tissues for use in cardiovascular, vascular, and orthopaedic surgeries throughout the United States and Canada.
This Zacks Rank #1 stock represents a strong year-to-date return of 44.34%. In fact, this compared favorably with the Zacks Consensus Estimate. Further, CryoLife reported an average beat of 502.5% for the last four quarters.
However, estimates for 2016 earnings increased by a couple of cents to 23 cents for the company over the last 30 days. Similarly, for fiscal 2017, the estimates surged by a penny to 32 cents.
IDEXX Laboratories Inc. (IDXX - Free Report) – Based in Westbrook, ME, IDEXX Laboratories, together with its subsidiaries, develops, manufactures, and distributes products and services primarily for the companion animal veterinary, livestock and poultry, water testing, and dairy markets worldwide.
This Zacks Rank #1 stock represents a strong year-to-date return of 51.48%. We also note that IDEXX Laboratories’ results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 12.72%.
Notably, estimate revisions for 2016 earnings increased by 16 cents to $2.36 over the last 30 days. Even for fiscal 2017, estimates surged a massive 20 cents to $2.67 over the same time period.
Masimo Corporation (MASI - Free Report) – Based in Irvine, CA, Masimo Corporation develops innovative monitoring technologies and markets non-invasive monitoring technologies worldwide that significantly improve patient care.
Notably, this Zacks Rank #1 stock represents a strong year-to-date return of 40.4%. A glimpse at estimate revisions shows that for the current year estimates increased by 19 cents to $2.02 over the last 30 days. Notably, for fiscal 2017, estimates rose by 12 cents to $2.18 over the same time frame.
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5 Medical Device Stocks to Buy on Q2 Earnings
Going by the second-quarter fiscal 2016 financial figures, the Medical sector has come up with an impressive earnings beat ratio of 88% and revenue beat ratio of 82%. Notably, the sector also reported earnings growth of 5% on a revenue growth of 9.2% on a year over year basis.
We particularly note the stellar year-over-year revenue growth that reflects robust performance by the sector, especially the medical devices stocks.
The highly resilient Medical device industry is expected to continue to drive investor returns, primarily based on positive demographic trends.
In fact, historical trends for the sector has been impressive too, as an analysis by the S&P Global deciphers that U.S. health care costs in the commercial market grew 6.5% in 2015, a 50% higher rate of improvement than that recorded in the prior year.
Moreover, according to Centers for Medicare and Medicaid Services’ (CMS) projection, total U.S. healthcare spending is expected to grow 5.8% on an average annually through 2025, courtesy of faster projected economic growth and an aging population.
We believe that higher spending bodes particularly well for the sector, especially for the medical devices providers.
MEDICAL INSTRUMENTS Industry Price Index
MEDICAL INSTRUMENTS Industry Price Index
Key Picks
We have picked five stocks that have rallied on the improvement in the medical device space. Notably, these stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Intuitive Surgical Inc. (ISRG - Free Report) – Based in Sunnyvale, CA, Intuitive Surgical designs, manufactures and markets da Vinci surgical systems, and related instruments and accessories. Notably, this Zacks Rank #2 stock has a strong year-to-date return of 26.7%.
We also note that Intuitive Surgical’s results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 18.05%.
However, estimate revisions for the current year and fiscal 2017 remained constant at $18.01 and $20.9, respectively, over the last 30 days.
Natus Medical Inc. – Pleasanton, CA-based Natus Medical designs, manufactures, and markets newborn care and neurology healthcare products and services worldwide.
We note results of this Zacks Rank #2 stock, compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 8.7%.
However, estimate revisions for the last 30 days stands at $1.69 for the current year.
CryoLife Inc. – Based in Kennesaw, GA, CryoLife, is the leader in the development and commercialization of implantable living human tissues for use in cardiovascular, vascular, and orthopaedic surgeries throughout the United States and Canada.
This Zacks Rank #1 stock represents a strong year-to-date return of 44.34%. In fact, this compared favorably with the Zacks Consensus Estimate. Further, CryoLife reported an average beat of 502.5% for the last four quarters.
However, estimates for 2016 earnings increased by a couple of cents to 23 cents for the company over the last 30 days. Similarly, for fiscal 2017, the estimates surged by a penny to 32 cents.
IDEXX Laboratories Inc. (IDXX - Free Report) – Based in Westbrook, ME, IDEXX Laboratories, together with its subsidiaries, develops, manufactures, and distributes products and services primarily for the companion animal veterinary, livestock and poultry, water testing, and dairy markets worldwide.
This Zacks Rank #1 stock represents a strong year-to-date return of 51.48%. We also note that IDEXX Laboratories’ results compared favorably with the Zacks Consensus Estimate in the last four quarters, with an average beat of 12.72%.
Notably, estimate revisions for 2016 earnings increased by 16 cents to $2.36 over the last 30 days. Even for fiscal 2017, estimates surged a massive 20 cents to $2.67 over the same time period.
Masimo Corporation (MASI - Free Report) – Based in Irvine, CA, Masimo Corporation develops innovative monitoring technologies and markets non-invasive monitoring technologies worldwide that significantly improve patient care.
Notably, this Zacks Rank #1 stock represents a strong year-to-date return of 40.4%. A glimpse at estimate revisions shows that for the current year estimates increased by 19 cents to $2.02 over the last 30 days. Notably, for fiscal 2017, estimates rose by 12 cents to $2.18 over the same time frame.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>