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3 Best MedTech Value Stocks to Buy Ahead of Q3 Earnings

Sriparna Ghosal
·5 min read

The harrowing impact of the coronavirus pandemic on the global economy continued through the third quarter. Even amid the worldwide halt in manufacturing and disruption in supply chain, the medical device space seems to have been more resilient than many others, contributing to their third-quarter performance. Let us delve deeper.

The MedTech Picture Ahead of Q3 Release

Despite being one of the worst-affected in the early months of the pandemic, the industry started showing signs of revival from the June quarter banking on the launch of several COVID-19 diagnostic tests and solid consumer interest toward digital health options like remote monitoring technologies.

However, due to the persistence of worldwide manufacturing and supply chain disruptions and a few other adverse externalities, share prices of a few fundamentally-strong MedTech stocks have been getting dragged down through the second quarter. As a result, these stocks are trading at dirt cheap rates currently.

In this regard, it can be mentioned that Medtronic’s MDT business during this pandemic has been affected by mainly three factors viz. decline in procedure volumes; loss of large bulk purchases as a result of pandemic-related slump in demand and delay in capital equipment purchases by hospitals and surgery centers. This has continued to drag the share price down. However, from the second quarter, the company started to show signs of improvement across many of its business segments. In the to-be-reported quarter results, this sign of rebound is expected to be more prominent.

In a similar way, in the second quarter, Boston Scientific BSX reported revenue decline at each of its core business segments and geographies owing to lower demand for non-COVID-19 healthcare products and elective procedures. However, the company’s MedSurg arm is expected to have recovered significantly in the third quarter as its stone franchise and SpaceOAR products are showing better resilience.

This trend is expected to have persisted for a few other MedTech players through the soon-to-be-reported third quarter.

Ideal Strategy Now

It is prudent for investors to bet on stocks which are currently trading at a discount but are backed by solid fundamentals and robust growth potential. Here we discuss some MedTech stocks which have the potential to bounce back after solid third-quarter results.

3 Stocks to Bet On:

The following are a few MedTech companies with a Value Style Score of A or B. Our research shows that stocks with a Value 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.

DaVita, Inc, DVA: This Zacks Rank #1 company’s Kidney Care segment continued delivering strong performance with respect to treatment of Chronic Kidney Disease (CKD) as well as End Stage Renal Disease (ESRD) and transplant. In May 2020, DaVita launched the DaVita Venture Group (“DVG”), through which it plans to accelerate efforts to develop and deploy solutions aimed at improving the health care and quality of life for patients of kidney disease and related chronic conditions. DaVita Kidney Care also provides support to nephrologist-led organizations like Nephrology Care Alliance (“NCA”) in their endeavor to treat patients of chronic kidney disease.

For the third quarter, revenues are projected at $2.94 billion, suggesting an improvement of 1.3% from the year-ago quarter. It has a Value Score of A.

DaVita Inc. Price

DaVita Inc. Price
DaVita Inc. Price

DaVita Inc. price | DaVita Inc. Quote

Accuray Incorporated ARAY: This Zacks Rank #2 company introduced the CyberKnife S7 System — the next generation CyberKnife platform — in June 2020. It is the only robotic radiosurgery system, which can deliver non-surgical stereotactic treatments with sub-millimeter accuracy anywhere in the body. This new CyberKnife technology is the most recent instance of the company’s innovation in radiation therapy that enables healthcare providers in offering best care to patients on new capabilities.

For the first quarter of fiscal 2021, the company has an earnings growth rate of 18.2%, which is favorable compared to the S&P 500 Index’s (24.6)%. It has a Value Score of B.

Accuray Incorporated Price

Accuray Incorporated Price
Accuray Incorporated Price

Accuray Incorporated price | Accuray Incorporated Quote

 

Cardinal Health, Inc. CAH: This Zacks Rank #2 company’s generics business continues to show healthy growth, supported by a solid customer base, significant scale of operations and the competence to source products from a complex and global supply network. The signing of a 15-year agreement with Bayer Healthcare for the contract manufacturing of Xofigo is a major positive. Cardinal Health extended agreements with CVS Health to distribute pharmaceuticals to retail pharmacies and distribution centers through Jun 30, 2023.

For the first quarter of fiscal 2021, revenues are projected at $38.48 billion, suggesting an improvement of 3.1% from the year-ago quarter. It has a Value Score of B.

Cardinal Health, Inc. Price

 

Cardinal Health, Inc. Price
Cardinal Health, Inc. Price

Cardinal Health, Inc. price | Cardinal Health, Inc. Quote

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Medtronic PLC (MDT) : Free Stock Analysis Report
 
Accuray Incorporated (ARAY) : Free Stock Analysis Report
 
DaVita Inc. (DVA) : Free Stock Analysis Report
 
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
 
Boston Scientific Corporation (BSX) : Free Stock Analysis Report
 
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