The Zacks Medical – Products industry comprises companies that provide medical products and cutting-edge technologies for diagnosis, observation, consultation, treatment and other healthcare services. Emphasis on research and development is the primary area of focus for companies in the space.
The industry participants cater to vital therapeutic areas like cardiovascular devices, nephrology and urology devices, ophthalmic devices, neurological devices, dermatological devices, respiratory devices, skin care devices, dental devices, orthopedic devices and gastrointestinal devices.
Notably, some of the key players in this industry are Medtronic plc (MDT - Free Report) , Abbott Laboratories (ABT - Free Report) , Baxter International Inc. (BAX - Free Report) , Boston Scientific Corporation (BSX - Free Report) , Zimmer Biomet Holdings, Inc. (ZBH - Free Report) , Perrigo Company plc (PRGO - Free Report) and ResMed Inc. (RMD - Free Report) .
Let us take a look at the three major themes in the industry:
- AI, Medical Mechatronics & Robotics: The rising utilization of minimally-invasive robot-assisted surgeries, self-automated home-based care, use of IT for quick and improved patient care, and shift of the payment system to a value-based model indicate the growing significance of AI in the Medical Products space. Mechatronics — a high-end technology incorporating electronics, ML and mechanical engineering — also characterizes the industry now. Intuitive Surgical (ISRG - Free Report) deserves a special mention with respect to AI, robotics and medical mechatronics. The company designs, manufactures and markets the da Vinci surgical system — an advanced robot-assisted surgical platform. This Mechatronic-based platform enables minimally-invasive surgery that helps reduce trauma associated with open surgery.
- Rampant M&As: In recent times, there has been a pickup in M&A activities in this space. In fact, apart from lessening pricing pressure and competition, dominant Medical Products players are increasingly relying on this strategy to expand customer base and gain leverage. Recently, Stryker Corporation (SYK - Free Report) inked a deal to acquire of Mobius Imaging, LLC, and is an instance of this strategy that deserves special mention. The buyout is expected to add value and expertise to Stryker’s imaging and robotics profile and boost its already robust product portfolio. Moreover, the transaction is expected to enable the acquirer’s Spine division to offer more complete procedural solutions, which includes sales, service and support.
- Emerging Markets Hold Promise: Given the rising medical awareness and economic prosperity, emerging economies have been witnessing solid demand for medical products. An aging population, relaxed regulations, cheap skilled labor, increasing wealth and government focus on healthcare infrastructure make these markets a happy hunting ground for global medical device players.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Medical Products industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #105, which places it in the top 41% 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 bright 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.
Before we present a few medical products 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’s Stock Market Performance
The industry has outperformed its sector in the past year. However, it fell short of the Zacks S&P 500 composite over the same time frame.
The industry has increased 3.8% over this period compared with the S&P 500’s growth of 7.5%. However, the broader sector has declined 9.5%.
One Year Price Performance
Industry’s Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing medical stocks, the industry is currently trading at 24.34X compared with the sector’s 19.14X and the S&P 500’s 17.15X.
Over the past five years, the industry has traded as high as 25.44X and as low as 17.03X, with the median being at 19.46X as the charts show below.
Price-to-Earnings Forward Twelve Months (F12M)
Price-to-Earnings Forward Twelve Months (F12M)
Following the bipartisan two-year suspension of a 2.3% excise tax on Medical Products and Medical Device manufacturers at the beginning of 2018, the industry witnessed massive investments. The reintroduction of the controversial 2.3% medical device tax’ repeal by the Senate in April 2019 has instilled optimism in the sector.
Meanwhile, per a CISION report, the United States remains the largest Medical Products market in the world with a market size of approximately $156 billion. The industry has been raking in more than $180 billion a year due to rising research and development activities, and growing exposure to AI.
Here, we present three stocks that either have a Zacks Rank #1 (Strong Buy) or 2 (Buy), which investors can take a look at. These stocks are well positioned to grow in the days ahead. You can see the complete list of today’s Zacks #1 Rank stocks here.
BioLife Solutions, Inc. (BLFS - Free Report)
BioLife Solutions, Inc. develops, manufactures, and markets grade cell and tissue hypothermic storage and cryopreservation freeze media products for cells, tissues, and organs in the United States. The company has pioneered the next generation of preservation solutions designed to maintain the viability and health of cellular matter and tissues during freezing, transportation and storage. The stock carries a Zacks Rank of 2.
For this Bothell, WA-based company, the Zacks Consensus Estimate for 2019 revenues indicates a year-over-year improvement of 43.4%. It has an average positive earnings surprise of 31.3% in the trailing four quarters.
Price and Consensus: BLFS
Surmodics, Inc. (SRDX - Free Report)
Surmodics, Inc. (SRDX - Free Report) provides medical devices and in vitro diagnostic technologies to the healthcare industry in the United States and internationally. The company operates through two segments – Medical Device and In Vitro Diagnostics. The stock sports a Zacks Rank of 1.
For this Eden Prairie, MN-based company, the Zacks Consensus Estimate for 2019 earnings indicates year-over-year improvement of 40.8%. It has an average positive earnings surprise of a whopping 700% in the trailing four quarters.
Price and Consensus: SRDX
Aphria Inc. (APHA - Free Report)
Aphria Inc. produces and sells medical cannabis in Canada and internationally. The company offers sativa, indica and hybrid medical marijuana products, and cannabis oils.
For this Leamington, Canada-based company, the Zacks Consensus Estimate for 2019 revenues indicates a year-over-year improvement of 160.4%.
Price and Consensus: APHA