The coronavirus pandemic threw a curveball that has impacted every facet of life and the MedTech industry has been no exception to the trend. However, going by the first half of the year, MedTech has been more resilient compared to other industries despite the worldwide manufacturing halt and supply chain disruption.
Since the reopening of the economy (with lockdown restrictions gradually lifted around May and June), the optimism among investors is palpable. However, market watchers remain skeptical about the economic scenario as spike in infections continue to plague several regions of the United States amid bleak prospect of vaccines.
While most sectors are struggling to cope with the market turmoil, the MedTech space has been benefiting from the growing worldwide demand for critical products and services. Hence, it may be prudent to invest in this space at the moment to capitalize on the prospects.
MedTech’s Pandemic Takeaways
If we look closely, the impact of the pandemic on MedTech has been mixed so far.
Postponement of elective and non-critical procedures (creating a dent on MedTech sales) came as a blow to most players in this space. Although key markets like the United States have taken steps to resume elective procedures, Moody’s anticipates earnings for the next 12 to 18 months to be flat (down from 2-4% growth per the prior prediction).
Moreover, according to Moody’s analysts, as per a MedTech Dive report, MedTech behemoths have high fixed costs associated with infrastructure such as manufacturing plants. Consequently, the fixed costs will make it difficult for companies to lower spending at the pace of revenue declines.
Also, diagnosis and treatment of COVID-19 patients became the top priority of health care facilities and first responders. Due to this scenario, ongoing and prospective clinical trials and product approvals will face delays. For instance, Abiomed (ABMD - Free Report) stated that it is hitting the pause button on its STEMI-DTU trial for the Impella heart pump.
Nonetheless, there have been areas where MedTech companies benefited from this pandemic as it drove their growth prospects and the momentum is likely to sustain for the remainder of the year.
Digital health played a crucial role during this public health crisis and continues to do so. The pandemic fueled rapid growth and adoption of digital health technologies such as telemedicine and remote patient monitoring, which helped the companies involved in the same to gain immensely from it.
Prospects of diagnostic testing are also immense as some of the key molecular diagnostic players are showing potential on account of rigorous work on development of diagnostic testing for the coronavirus and attaining regulatory approvals for them.
3 Top MedTech Picks to Add to Your Portfolio Now
Going by the aforementioned discussion, investors might take a look at these three stocks that have capitalized on the COVID-19 pandemic.
To narrow down the list, we have selected stocks with a VGM Score of A or B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.
Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) is a key integrated provider of products and services for dialysis patients. In July, this Zacks Ranked #2 company with a VGM Score of A, reported solid second-quarter 2020 results. A wide range of dialysis products and services instills optimism in the stock. Management expects to undertake meaningful investments in 2020 to capitalize on opportunities and optimize cost base. Per the postulates of the ‘Growth Strategy 2020’, the company aims to boost revenues to $28 billion by 2020.
Year to date, shares of this company have gained 15.1%, compared with the industry’s rally of 12.5%.
Owens & Minor, Inc. (OMI - Free Report) operates as a healthcare solutions company in the United States and internationally. The company exited second-quarter 2020 on a strong note with improved results courtesy of increased productivity, higher manufacturing output related to personal protective equipment (PPE), favorable revenue mix, and continued execution and delivery of operating efficiencies. It achieved a milestone in the battle against the pandemic with nearly five billion units of PPE shipped since February 2020. Additionally, strong second-quarter performance enabled the company to double full-year 2020 adjusted earnings per share (EPS) guidance to $1-$1.20 and reconfirm double digit adjusted EPS growth in 2021.
Shares of this Zacks Rank #2 company, with a VGM Score of A, have gained 211.6% on a year-to-date basis, against the industry’s decline of 4.1%.
Thermo Fisher Scientific, Inc. (TMO - Free Report) , a scientific instrument maker and a world leader in serving science, has taken significant strides with respect to coronavirus testing. The company’s real-time PCR test has got FDA’s EUA as well as CE mark in the European Union. In May, the company received an expanded EUA for its multiplex real-time PCR test intended for the qualitative detection of nucleic acid from SARS CoV 2. It also progressed with highly specialized viral transport media (VTM) for sample collection. At the end of the second-quarter 2020, the company noted that, its PCR-based workflow is widely utilized in 50 countries. The company ended the quarter with enough capacity to produce more than 10 million tests per week. Further, in terms of the development of therapeutics and vaccines, Thermo Fisher is partnering with a number of pharma and biotech customers who are working on coronavirus-related projects.
Year to date, shares of this Zacks Rank #2 company, with a VGM Score of B, have gained 28.7%, compared with the industry’s growth of 12.5%.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>