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Zacks Industry Outlook Highlights: Abbott Lab, Bio-Rad Lab and Hill-Rom Holdings

·9-min read

For Immediate Release

Chicago, IL – December 8, 2021 – Today, Zacks Equity Research discusses Medical Products, including Abbott Laboratories ABT, Bio-Rad Laboratories, Inc. BIO and Hill-Rom Holdings, Inc. HRC.

Link: https://www.zacks.com/commentary/1836145/3-stocks-to-capitalize-on-the-buoyant-medical-products-industry

The COVID-19 pandemic, which turned out to be a biological crisis of unprecedented nature, has altered the very nature and dynamics of the healthcare industry. The Zacks Medical – Products industry was also not spared by the pandemic, and bore the brunt of widespread supply chain disruptions and deferral of elective procedures.

However, the medical products space has experienced substantial recovery, primarily owing to the easing of prior restrictions and ramped up vaccinations. Apart from this, slow resumption of elective procedures, rising demand for in vitro diagnostics (IVD) and increasing dependence on Artificial Intelligence (AI) & Robotics are likely to favor the industry participants in the days ahead.

Despite a pandemic-induced disruption triggered by the Delta variant, particularly in the months of August and September, the industry players have not shown signs of slowing down yet. Industry participants like Abbott LabBio-Rad Lab and Hill-Rom Holdings are likely to gain from the abovementioned factors.

Industry Description

The industry comprises companies that provide medical products and cutting-edge technologies for diagnosis, observation, consultation, treatment and other healthcare services. The industry players are primarily focused on research and development. The industry participants primarily cater to vital therapeutic areas like cardiovascular devices, nephrology and urology devices, to name a few.

The Delta variant has caused significant disruption and there has been an increase in the number of COVID-19 cases, testing, vaccine and therapeutic makers witnessed huge market adoption of their COVID-related healthcare support products and services in the third quarter of 2021. In fact, diagnostic testing stocks, which had registered a slowdown in demand for COVID-19 testing in the second quarter, picked up momentum in the third quarter, in line with industry trend.

Major Trends Shaping the Future of Medical Products 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 underscore the growing influence of AI in the Medical Products space. In fact, mechatronics — a high-end technology incorporating electronics, ML and mechanical engineering — is rapidly becoming a defining characteristic of the space.

There are several companies that have shown substantial prowess when it comes to their involvement in AI, robotics and medical mechatronics. Advancements in robot-assisted surgical platforms continue to be crucial with respect to minimally-invasive surgery that helps in reducing trauma associated with open surgery.

With respect to Mechatronics, the benefits of the same have been demonstrated in the form of 3D printing, which has altered the face of the medical devices industry. Currently, 3D printing is being utilized to print stem cells, blood vessels, heart tissues, prosthetic organs and skin.

Rising Demand for IVD: Toward the end of February 2020, the COVID-19 outbreak started to spread rapidly and took the shape of a pandemic. This led to the rise in global demand for diagnostic testing kits in order to curb the spread of the virus. The need of the hour became testing and that led to a shift in the pipeline of IVD products, with a large number of rapid, point-of-care devices going into development.

Companies not only received emergency use authorization (EUA) from the FDA but also bolstered production to aid testing shortages. The industry players anticipate significant demand for rapid diagnostic testing in the future as well and are well-poised to capitalize on the same.

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 extremely lucrative for global medical device players.

Zacks Industry Rank

The Zacks Medical Products industry falls within the broader Zacks Medical sector.

It carries a Zacks Industry Rank #175, which places it in the bottom 31% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates bleak 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 Performance

The industry has outperformed its own sector in the past year but fell short of the Zacks S&P 500 composite in the same time frame.

Stocks in this industry have collectively lost 5.6% compared with the Zacks Medical sector’s decline of 16%. The S&P 500 rallied 23% in the same time frame.

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 24.70X compared with the S&P 500’s 21.19X and the sector’s 21.57X.

Over the last five years, the industry has traded as high as 30.11X and as low as 17.03X, with the median being at 23.19X.

3 Promising Medical Products Stocks

Abbott Laboratories: Abbott discovers, develops, manufactures and sells a diversified line of health care products. The company delivered better-than-expected earnings and revenue numbers for the third quarter of 2021. Overall, year-over-year improvements were robust.

Excluding COVID-19 testing-related sales, which totaled $1.9 billion in the quarter, organic sales increased 12% year over year. Although COVID-19 case rates surged in the United States and other geographies during the third quarter, the company registered strong growth in its more consumer-facing businesses like nutrition, established pharmaceuticals and diabetes care.

Diagnostics sales were strong in the third quarter on rising COVID-19 case count. Abbott raised its 2021 EPS guidance. Full-year adjusted earnings from continuing operations (excluding specified items of $1.45 per share) are now expected to be $5.00- $5.10 per share (compared with the earlier band of $4.30- $4.50). The company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For this North Chicago, IL-based company, the Zacks Consensus Estimate for 2021 revenues indicates an improvement of 21.5%, while the same for earnings suggests growth of 38.4%. It has a trailing four-quarter earnings surprise of 18.5%, on average.

Bio-Rad Laboratories, Inc.: Bio-Rad Laboratories is a manufacturer and global supplier of clinical diagnostics and life science research products in the healthcare, analytical chemistry, life science research and other markets. The company witnessed solid top and bottom-line growth in the third quarter of 2021.

An increase in demand for Droplet Digital PCR products and core qPCR business growth on account of strong uptake of the latest generation CFX Opus platform are encouraging. Strength in its key product lines across major geographic regions buoys optimism. The uptick in the Clinical Diagnostics arm driven by higher utilization in lab operations as businesses recover from the COVID-19 pandemic is encouraging as well.

For this Hercules, CA-based company, the Zacks Consensus Estimate for 2021 revenues suggests growth of 13.7%, while the same for earnings indicates an increase of 45.7%. It has a trailing four-quarter earnings surprise of 71.3%, on average. Presently, the company carries a Zacks Rank of 2 (Buy).

Hill-Rom Holdings, Inc.: Hill-Rom Holdings is one of the leading global medical device companies. The company exited fourth-quarter fiscal 2021 with better-than-expected earnings and revenues. The year-over-year upside in Front Line Care can be attributed to strong demand and double-digit growth for Welch Allyn patient vital signs and cardiac monitoring devices, physical assessment tools including new digital solutions and vision screening products.

The company witnessed improved demand for patient positioning equipment and operating room tables, including record placements of Integrated Table Motion, as surgical procedures continued to rebound. Currently, the company carries a Zacks Rank #2.

For this Chicago, IL-based company, the Zacks Consensus Estimate for fiscal 2022 revenues suggests growth of 2.2%, while the same for earnings indicates an improvement of 3%. It has a trailing four-quarter earnings surprise of 20.8%, on average.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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