The coronavirus pandemic has created unique opportunities for the Zacks
Instruments - Scientific industry participants — Mettler-Toledo International ( MTD Quick Quote MTD - Free Report) , Waters Corporation ( WAT Quick Quote WAT - Free Report) , PerkinElmer ( PKI Quick Quote PKI - Free Report) and Bruker Corporation ( BRKR Quick Quote BRKR - Free Report) . These companies are gaining from solid demand for coronavirus testing tools as well as rising instrument orders across the globe. Moreover, increasing spending on health care driven by an aging demography and continued innovation in the pharma and life sciences end-markets are key catalysts despite coronavirus-induced macroeconomic uncertainties. Further, the reopening of university research laboratories as well as applied and industrial labs globally is a driving factor for the near term. Industry Description
The Zacks Instruments - Scientific industry comprises companies offering scientific instruments, analytical tools, diagnostic solutions, precision instruments & services, and test & sensor solutions.
The primary end-markets served by the industry participants are life science research in academia, medical schools and government, pharmaceuticals and biotechnology, microbiology and diagnostics, nanotechnology, and materials science research. A few companies also serve the food and nutritional safety, biochemical, and industrial spaces. Most of the industry participants are under stringent regulatory scrutiny worldwide. They have to adhere to the U.S. Food and Drug Administration (FDA) norms as well as rules set by other global regulatory bodies for serving highly regulated end-markets like life sciences and pharma. 3 Trends Shaping the Future of Instruments-Scientific Industry : The industry is benefiting from strong end-market demand, particularly from the life science, pharmaceutical and academic markets. Increasing demand for generic drugs and biosimilars is driving growth for scientific tool and apparatus providers. Additionally, pharma companies are focusing on rapidly growing areas like proteomics and phenomics, biopharma and applied, microbiology and diagnostics, and neuroscience and cell microscopy, which creates significant demand for the instruments provided by industry participants. Strong End-Market Demand Socioeconomic factors like an aging demography and increasing environmental regulations are driving demand for scientific measurement solutions. Moreover, robust worldwide healthcare spending is a major growth driver. Notably, for fiscal 2021, Congress approved roughly a 3% increase in funding for the National Institutes of Health (NIH), which now stands at $42.9 billion. Aging Demography Driving Spending: : Further, the industry is gaining from increasing exposure to developing economies like China and India. Prospects in China are huge as regulators are attempting to raise the country’s biopharma industry to global standards. Moreover, efforts to improve the drug development process and production quality in the country are noteworthy. These factors are resulting in strong demand for instruments. However, any undesirable turn in the recent trade spat between the United States and China will not augur well for some of the industry players. Solid Emerging Market Prospects Zacks Industry Rank Indicates Solid Prospects
The Zacks Instruments - Scientific industry is housed within the broader Zacks
Computer and Technology sector. It carries a Zacks Industry Rank #37, which places it at the top 15% of more than 250 Zacks industries. The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1. The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. Since Jun 30, the industry’s 2021 earnings estimates have increased 19.5%. Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture. Industry Lags Sector, Beats S&P 500
The Zacks Instruments – Scientific industry has underperformed the broader Zacks Computer and Technology sector but outperformed the S&P 500 composite over the past year.
The industry has gained 29.2% over this period compared with the S&P 500’s increase of 16.3% and against the broader sector’s rally of 35.2%. One-Year Price Performance
Industry’s Current Valuation
On the basis of forward 12-month P/E, which is a commonly used multiple for valuing scientific instrument stocks, we see that the industry is currently trading at 28.15X compared with the S&P 500’s 23X and the Zacks Computer and Technology sector’s 28.59X.
Over the last five years, the industry has traded as high as 28.15X, as low as 19.45X and at the median of 23.33X, as the chart below shows. Forward 12-Month Price-to-Earnings (P/E) Ratio
4 Scientific Instruments Providers to Watch PerkinElmer: This Waltham, MA-headquartered company is riding on an expanding product portfolio, growing global exposure, and strengthening footprint in emerging markets like China and India. Markedly, PerkinElemer’s ChemDraw software is leading the industry. The company is gaining market share backed by solid demand for Electronic Lab Notebooks that includes cloud-based Elements SaaS Offering and enterprise E-Notebook Solutions. Moreover, solid adoption of the TIBCO Spotfire platform for scientific data analytics is a key catalyst. Acquisitions like that of Italy-based DANI Instruments and Cisbio Bioassays have expanded this Zacks Rank #1 (Strong Buy) company’s footprint in food, pharma and environmental and life sciences and diagnostics end-markets, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here. PerkinElmer shares have returned 49.2% in the past year. The Zacks Consensus Estimate for its current-year earnings has been revised 0.6% north to $7.86 per share over the past 30 days. Price and Consensus: PKI
Mettler-Toledo International: This Columbus, OH-domiciled company has returned 51.9% in the past year. This Zacks Rank #2 (Buy) company continues to see solid momentum across its Laboratory and Industrial segments. Markedly, Mettler-Toledo is the world's largest manufacturer and marketer of weighing instruments for use in laboratory, industrial and food retailing applications. Further, benefits from strategic investments in Spinnaker, marketing initiatives, field resources and product development are contributing well. Additionally, strengthening core industrial business is a major positive. Also, the company’s growing momentum in China remains a tailwind. Pricing improvement and ongoing efficiency initiatives like SternDrive are expected to help in margin expansion over the long haul. Moreover, the Zacks Consensus Estimate for the company’s current-year earnings has moved by a couple of cents north to $28.10 per share over the past 30 days. Price and Consensus: MTD
Waters Corporation: This Milford, MA-based company is benefiting from growth in its top global pharma accounts. Solid momentum across new product lines like BioAccord and Cyclic IMS remains a positive. Further, the company’s growing investments in liquid chromatography (LC), LC-MS and chemistry categories are aiding it in gaining traction in the large molecule market. Also, growing momentum across biomedical research applications is another positive. Markedly, Waters, which is currently one of the leading players in the mass spectrometry (MS) market, has been garnering significantly from the sale of its advanced MS instruments. Further, increasing regulation around food safety and quality, strict conditions for food testing, and environmental and fine chemical applications bode well for the company’s prospects. Additionally, strong execution of the company’s cost-cutting strategies remains a tailwind. Additionally, the consensus mark for this Zacks Rank #3 (Hold) company’s current-year earnings has moved 0.7% north to $9.15 per share over the past 30 days. Shares are up 11.3% in the past year. Price and Consensus: WAT
Bruker Corporation: This Billerica, MA-headquartered company is well-poised to grow in the proteomics and spatial-omics fields. This Zacks Rank #3 company benefits from strong prospects in Nuclear Magnetic Resonance (NMR) industry, MALDI Biotyper and preclinical imaging (PCI) market. Markedly, Bruker’s BioSpin products, which have specific application in structural proteomics, drug discovery, research and food and materials science fields, provide customers with the ability to ascertain the structure, dynamics, and function of specific molecules, such as proteins, as well as characterize and determine the composition of mixtures. Moreover, demand for the MALDI Biotyper is increasing in applied markets, specifically for food, feed and beverage. Additionally, Bruker offers advanced PCI solutions for a broad spectrum of application fields, such as cancer research, functional and anatomical neuroimaging, orthopedics, cardiac imaging and stroke models. Moreover, this division is experiencing increasing customer demand for higher-strength pre-clinical magnetic resonance imaging system. Notably, the Zacks Consensus Estimate for 2021 earnings has moved up by a penny to $1.72 per share in the past 30 days. The stock has increased 14.5% on a year-to-date basis. Price and Consensus: BRKR