Back to top

Image: Bigstock

3 Solid Buys From MedTech Following 2024 Guidance Raise

Read MoreHide Full Article

Market watchers had a bearish view for MedTech stocks ahead of the first-quarter earnings season, thanks to the ongoing geopolitical discord across the globe with major complications arising from the Middle-East conflicts. Security threats around the Red Sea were alarming through the months of the first quarter, leading to a significant rise in freight costs and shipping times. Added to this, healthcare labor shortages continued to act as a major business disruptor.

While these remarkably reduced the gross and operating margins of the companies in the quarter, many MedTech majors appeared to be in a gradual recovery trajectory, raising optimism for the rest of the year.

Here, we have picked three MedTech stocks — Boston Scientific Corporation (BSX - Free Report) , Align Technology (ALGN - Free Report) and Alcon, Inc. (ALC - Free Report) — that increased their full-year guidance along with the just-reported quarter’s results.

These fundamentally strong stocks, with their favorable Zacks Rank and raised near-term guidance, are clear green flags for investors who are keen on grabbing opportunities in the MedTech space. Let’s delve deeper.

Boston Scientific: This medical device stalwart posted first-quarter 2024 adjusted earnings per share of 56 cents, up 19.1% from the year-ago figure. The figure beat the Zacks Consensus Estimate by 9.8%. First-quarter revenues of $3.86 billion improved 13.8% year over year on a reported basis and 15% on an operational basis (at a constant exchange rate or CER). Revenues exceeded the Zacks Consensus Estimate by 4.8%.

However, the company reported a 16.3% rise in the cost of products sold, resulting in a 67-basis point contraction in gross margin. Further, there was a 12.3% rise in selling, general and administrative expenses.

Despite cost escalation, Boston Scientific witnessed strength across target markets. Strong worldwide demand for its Electrophysiology and Structural Heart lines, traction in Europe for its next-generation WATCHMAN FLX, as well as contributions from accretive acquisitions, were key drivers of first-quarter results.

The Pain and Brain franchises, too, demonstrated solid traction, banking on the strong execution of core growth strategies. The Electrophysiology arm received a strong boost on the FDA approval for FARAPULSE.

Accordingly, the company lifted its 2024 expectations. Full-year net sales growth is now expected to be approximately 10-12% on an organic basis (8-9% growth projected earlier). Full-year adjusted earnings per share are expected in the range of $2.29 to $2.34 ($2.23 to $2.27 estimated earlier).

While rising costs and expenses and foreign exchange headwinds are still major concerns, the raised 2024 guidance is an indication that this stock has the potential to dodge the near-term headwinds.

This Zacks Rank #2 (Buy) stock can be a good bet now, considering the stock also has a 5-year historical growth rate of 12.9%, outperforming the industry average of 10.8%.

The Zacks Consensus Estimate for Boston Scientific’s 2024 earnings has increased to $2.23 from $2.25 per share in the past 30 days, implying 13.2% growth from 2023.

Year to date, shares of BSX have rallied 27.2% compared with a mere 2.8% improvement of the industry.

Zacks Investment Research
Image Source: Zacks Investment Research

Align Technology: The company delivered first-quarter fiscal 2024 adjusted earnings per share of $2.14, up 17.6% from the year-ago earnings. The bottom line beat the Zacks Consensus Estimate by 8.1%. Revenues increased 5.8% year over year to $997.4 million in the quarter and exceeded the Zacks Consensus Estimate by 2.6%.

Matching the industry-wide trend, this stock too incurred significant costs and expenses in the first quarter. While there was a 6.1% increase in the cost of net revenues, SG&A expenses also increased 2.8% in the reported quarter.

During the first quarter, the company particularly leveraged recent innovations and market expansion efforts to offset the impact of cost escalation and supply disruptions. The increased adoption of the Invisalign Palatal Expander system in the United States and Canada buoyed optimism, with the company having an agenda to launch the device in several geographies in the near term. Strength in the teen and younger patient business is driven by the growth of Invisalign First. The company is highly optimistic about gaining market share in the global teen markets, banking on its ongoing campaigns with influencers. 

Further, strong solvency is highly promising. For the full year, ALGN raised its revenue expectation. It expects revenues to be up 6-8% year over year (the previous guidance was of mid-single-digit growth from 2023).

Added to this, during the second quarter of 2024, the company expects to repurchase up to $150 million of common stock through either a combination of open market repurchase or an accelerated stock repurchase agreement. The company currently has $650 million available for repurchase of its common stock under the January 2023 repurchase program.

This stock is an attractive pick now with a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Estimates for Align Technology’s 2024 earnings have increased to $9.65 from $9.41 per share in the past 30 days, implying 12.1% growth from 2023.

Over the past six months, shares of ALGN have rallied 36.9% compared with a 7.8% improvement of the industry.

Zacks Investment Research
Image Source: Zacks Investment Research


Alcon: The company delivered core earnings per share of 78 cents in the first quarter of 2024, up 11% from the year-ago quarter’s figure (up 21% at the constant exchange rate or CER). The figure topped the Zacks Consensus Estimate by 8.3%. Alcon’s net sales to third parties in the first quarter were $2.44 billion, missing the Zacks Consensus Estimate by 0.6%. However, the top line increased 5% from the year-ago quarter’s levels (up 7% at CER).

Despite the near-term constraints, the company delivered substantial growth in both its Surgical and Vision Care franchises on the back of healthy markets. International markets drove Surgical’s growth, while Vision Care's growth was driven by product innovation, including toric multifocal modalities, and price increases.

The company is presently working on several innovative products to support its customers and their patients. These are expected to outpace market growth, deliver operating leverage and create long-term shareholder value.

Based on strong prospects, Alcon has raised its 2024 outlook this time. The company currently anticipates 2024 net sales in the range of $9.90-$10.10 billion, indicating growth of 7%-9% at CER from 2023 (earlier expectation was 6%-8% growth at CER). Core EPS for the full year is expected in the range of $3.00-$3.10. This suggests growth of 15%-18%% at CER from the 2023 levels (13%-16% CER growth expectation earlier).

This Zacks Rank #2 stock also has a 5-year historical growth rate of 12.8%.

Also, the stock has an attractive Value Score of B.

Alcon is currently trading at a 12-month forward earnings multiple of 27.86, below its median of 29.35 over the last five years. The industry’s forward earnings multiple stays at 33.84. The stock is trading cheap compared to the industry, making it an attractive value investment prospect at this moment.

Estimates for Alcon’s 2024 earnings have increased to $3.05 from $3.02 per share in the past 90 days, implying 11.3% growth from 2023.

Year to date, shares of ALC have risen 14.3% compared with a 6.1% improvement of the industry.

Zacks Investment Research
Image Source: Zacks Investment Research

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

Boston Scientific Corporation (BSX) - free report >>

Align Technology, Inc. (ALGN) - free report >>

Alcon (ALC) - free report >>

Published in