The coronavirus pandemic has created unique opportunities for the Zacks
Instruments - Scientific industry participants — Mettler-Toledo International ( MTD Quick Quote MTD - Free Report) , PerkinElmer ( PKI Quick Quote PKI - Free Report) and Waters Corporation ( WAT Quick Quote WAT - Free Report) . These companies are gaining from solid demand for coronavirus testing tools as well as rising instrument orders across the globe. Moreover, increasing health care spending 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. For fiscal 2022, the proposed budget is $51 billion for NIH. 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. 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 #113, which places it at the top 45% 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 Dec 31, 2020, the industry’s 2021 earnings estimates have moved up 19.8%. 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 Beats Sector and S&P 500
The Zacks Instruments – Scientific industry has outperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has risen 51.9% over this period compared with the S&P 500’s increase of 29.7% and the broader sector’s rally of 35.3%. 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 31.11X compared with the S&P 500’s 20.89X and the Zacks Computer and Technology sector’s 27.48X.
Over the last five years, the industry has traded as high as 23.90X, as low as 15.31X and at the median of 18.46X, as the chart below shows. Forward 12-Month Price-to-Earnings (P/E) Ratio
3 Scientific Instruments Providers to Watch
Waters Corporation: This Milford, MA-based company is an analytical instrument manufacturer and offers practical and sustainable products for laboratory-dependent organizations. This Zacks Rank #2 (Buy) company is benefiting from growth in its top global pharma accounts. Solid momentum across new product lines like BioAccord and Cyclic IMS is a positive. Its strengthening presence in the industrial, pharmaceutical, and governmental and academic end-markets remains a tailwind. The company’s growing investments in LC, LC-MS and chemistry categories are aiding it in gaining traction in large molecule markets. Also, increasing momentum across biomedical research applications is another positive. Further, the company remains optimistic regarding its strong growth initiatives and product introductions. Notably, the Zacks Consensus Estimate for its 2021 earnings has risen 6.2% to $10.66 per share in the past 60 days. The stock has rallied 28.3% on a year-to-date basis. Price and Consensus: WAT
PerkinElmer: This Waltham, MA-headquartered company is riding on an expanding product portfolio and growing global exposure. This Zacks Rank #3 (Hold) company delivers a comprehensive suite of scientific informatics and software solutions to aggregate data into actionable insights in an automated and scalable way. Strength in the company’s Immunodiagnostics business has been responsible for benefiting top-line growth, driven by COVID and non-COVID sales with EUROIMMUN’s non-COVID business continuing to rebound strongly. The company expects COVID-19 surveillance testing to remain significant in the near future. PerkinElmer’s shares have returned 33.9% year to date. The Zacks Consensus Estimate for its current-year earnings has been unchanged at $9.91 per share over the past 60 days. Price and Consensus: PKI
Mettler-Toledo International: This Columbus, OH-domiciled company has returned 40.4% year to date. This Zacks Rank #3 company continues to see solid momentum across its Laboratory, Industrial and Food Retail segments. The company’s strengthening presence in Americas, Europe, Asia and Rest of the World remains positive. Furthermore, portfolio strength, cost-cutting efforts, robust sales and marketing strategies, benefits from investments in Spinnaker sales, and field resources are contributing well. Also, a strong core industrial business is encouraging. Further, solid demand across pharmaceutical and life science markets is a tailwind. The Zacks Consensus Estimate for the company’s current-year earnings has been unchanged at $32.86 per share over the past 60 days. Price and Consensus: MTD