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US-India Trade Tensions Rise: 3 Stocks in the Line of Fire
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Asia Pacific seems to be fraught with trade tensions. President Trump recently reacted to India’s new e-commerce rules which might considerably restrict sales of U.S. medical device giants. This will probably irk those who have invested in medical device companies with a significant foothold in India.
Price caps on medical devices have been initiated by the Indian government to ensure affordable medical aid for the poor — a major section of India’s population. Over the recent past, e-commerce chains like Amazon (AMZN - Free Report) have significantly boosted U.S. medical device companies’ revenues in India.
Naturally, U.S. medical bigwigs like Abbott Laboratories (ABT - Free Report) and Boston Scientific Corporation (BSX - Free Report) are upset about the sales restriction in India as the nation’s medical products market is valued at a whopping $5 billion.
Echoing the sentiment, experts now foresee a trade deficit of $21.3 billion for the United States (per Business Insider).
Trade Tensions Likely to Flare Up
India lost its GSP (Generalized System of Preferences) status on May 31 due to the strained trade ties with the United States. Meanwhile, the Narendra Modi-led government is set to closely regulate the medical devices industry, with a view to benefit local players. The government is also working on a proposal to formulate a pricing policy for more than 6,000 medical devices in India such as pacemakers, hearing aids, glucometers and blood pressure instruments, apart from stents and knee implants. A 30% customs duty on IVD (in-vitro diagnostics) reagents dealt another blow.
Investors should know that India presently imports 80% of its medical devices from the United States. Hence, the country’s move toward self-sufficiency could compel U.S. medical device bigwigs to slash product prices for India in a bid to retain this market.
Going by a report by Business Standard, India is primarily an import-driven market. Imports of medical devices has increased 24% year over year so far in 2019 to Rs 38,837 crore, led by diagnostic items, ultra-sonogram machines, MRI and ECG apparatus, syringes with needles, suture needles, digital thermometers, among others.
Stocks to Face the Brunt
Needless to say, this has triggered a decline in the medical device sector’s emerging market business. Losses can be widespread in the sector, with bigwigs taking severe blows. We have zeroed down on three companies which are widely exposed to the trade conflict owing to their extensive presence in India.
Medtronic (MDT - Free Report) manufactures and sells a wide array of medical devices, including stents, cardiovascular products, continuous glucose monitoring products and orthopedic devices. These products are sold worldwide, significantly contributing to the company’s top line.
In India, the company owns research and development hubs in Bengaluru and Hyderabad.
In the last reported quarter, the company’s emerging market revenues totaled $1.29 billion, up 3.9% year over year and accounted for 16% of net sales.
Illinois-based Abbott Laboratories discovers, develops, manufactures and sells a diversified line of medical products.
In India, the company develops and distributes more than 600 products for varied medical use. These products include PRISM Director, PRISMnEXT blood screening assays, Abocal tablets and Advanced CustomVue for laser vision correction.
Being a global leader in IVD, Abbott offers a broad range of instruments and tests for hospitals, reference laboratories, blood banks, physician offices and clinics in India.
In the last reported quarter, the company saw significant top-line contribution from emerging markets.
California-based Varian Medical Systems, Inc. is a leading provider of radiotherapy, radiosurgery, proton therapy and brachytherapy for the treatment of cancer and other medical conditions.
Notably, Varian’s robust portfolio has driven its sales in the Asia Pacific. Across India, several chains of hospitals have adopted Varian’s advanced technologies. The company’s flagship platforms like Halcyon, HyperArc and ProBeam are much in demand in India.
For instance, the company recently signed a three-year agreement with the TATA Trusts to increase patient access to advanced radiation therapy treatments in India. Varian will be the preferred supplier of 200 radiation therapy systems. (Read More: Varian & Tata Trust Tie Up to Boost Radiotherapy in India). We expect the latest trade tensions to impact this coalition as well.
In the last reported quarter, the company’s Asia-Pacific revenues grew 7% year over year.
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This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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US-India Trade Tensions Rise: 3 Stocks in the Line of Fire
Asia Pacific seems to be fraught with trade tensions. President Trump recently reacted to India’s new e-commerce rules which might considerably restrict sales of U.S. medical device giants. This will probably irk those who have invested in medical device companies with a significant foothold in India.
Price caps on medical devices have been initiated by the Indian government to ensure affordable medical aid for the poor — a major section of India’s population. Over the recent past, e-commerce chains like Amazon (AMZN - Free Report) have significantly boosted U.S. medical device companies’ revenues in India.
Naturally, U.S. medical bigwigs like Abbott Laboratories (ABT - Free Report) and Boston Scientific Corporation (BSX - Free Report) are upset about the sales restriction in India as the nation’s medical products market is valued at a whopping $5 billion.
Echoing the sentiment, experts now foresee a trade deficit of $21.3 billion for the United States (per Business Insider).
Trade Tensions Likely to Flare Up
India lost its GSP (Generalized System of Preferences) status on May 31 due to the strained trade ties with the United States. Meanwhile, the Narendra Modi-led government is set to closely regulate the medical devices industry, with a view to benefit local players. The government is also working on a proposal to formulate a pricing policy for more than 6,000 medical devices in India such as pacemakers, hearing aids, glucometers and blood pressure instruments, apart from stents and knee implants. A 30% customs duty on IVD (in-vitro diagnostics) reagents dealt another blow.
Investors should know that India presently imports 80% of its medical devices from the United States. Hence, the country’s move toward self-sufficiency could compel U.S. medical device bigwigs to slash product prices for India in a bid to retain this market.
Going by a report by Business Standard, India is primarily an import-driven market. Imports of medical devices has increased 24% year over year so far in 2019 to Rs 38,837 crore, led by diagnostic items, ultra-sonogram machines, MRI and ECG apparatus, syringes with needles, suture needles, digital thermometers, among others.
Stocks to Face the Brunt
Needless to say, this has triggered a decline in the medical device sector’s emerging market business. Losses can be widespread in the sector, with bigwigs taking severe blows. We have zeroed down on three companies which are widely exposed to the trade conflict owing to their extensive presence in India.
Each of these stocks currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Medtronic (MDT - Free Report) manufactures and sells a wide array of medical devices, including stents, cardiovascular products, continuous glucose monitoring products and orthopedic devices. These products are sold worldwide, significantly contributing to the company’s top line.
In India, the company owns research and development hubs in Bengaluru and Hyderabad.
In the last reported quarter, the company’s emerging market revenues totaled $1.29 billion, up 3.9% year over year and accounted for 16% of net sales.
Medtronic PLC Price and Consensus
Medtronic PLC price-consensus-chart | Medtronic PLC Quote
Illinois-based Abbott Laboratories discovers, develops, manufactures and sells a diversified line of medical products.
In India, the company develops and distributes more than 600 products for varied medical use. These products include PRISM Director, PRISMnEXT blood screening assays, Abocal tablets and Advanced CustomVue for laser vision correction.
Being a global leader in IVD, Abbott offers a broad range of instruments and tests for hospitals, reference laboratories, blood banks, physician offices and clinics in India.
In the last reported quarter, the company saw significant top-line contribution from emerging markets.
Abbott Laboratories Price and Consensus
Abbott Laboratories price-consensus-chart | Abbott Laboratories Quote
California-based Varian Medical Systems, Inc. is a leading provider of radiotherapy, radiosurgery, proton therapy and brachytherapy for the treatment of cancer and other medical conditions.
Notably, Varian’s robust portfolio has driven its sales in the Asia Pacific. Across India, several chains of hospitals have adopted Varian’s advanced technologies. The company’s flagship platforms like Halcyon, HyperArc and ProBeam are much in demand in India.
For instance, the company recently signed a three-year agreement with the TATA Trusts to increase patient access to advanced radiation therapy treatments in India. Varian will be the preferred supplier of 200 radiation therapy systems. (Read More: Varian & Tata Trust Tie Up to Boost Radiotherapy in India). We expect the latest trade tensions to impact this coalition as well.
In the last reported quarter, the company’s Asia-Pacific revenues grew 7% year over year.
Varian Medical Systems, Inc. Price and Consensus
Varian Medical Systems, Inc. price-consensus-chart | Varian Medical Systems, Inc. Quote
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>