Over the past six-seven months, the global economy has been grappling with massive disruption caused by the coronavirus pandemic. Per a report by Fitch Ratings published in September, global GDP is expected to contract as much as 4.4% in 2020.
This has also been evident from the continuous upheaval across global stock markets, accompanied by massive surge in unemployment. Per the Organisation for Economic Co-operation and Development’s (“OECD”) last updated report, unemployment rate was 7.7% in July 2020.
Meanwhile, a fresh rise in coronavirus cases resulting from the rushed unlocking of the economy has kept investors on edge at large.
The MedTech Picture
Through the initial months of 2020, global manufacturing and supply chain disruptions as well as deferral of elective medical/surgical procedures have dampened the U.S. MedTech scenario. This also caused several major firms to slash or withdraw guidance for the full year.
However, things started turning around in the June quarter as several MedTech firms delivered a relatively better performance, mainly banking on a plethora of newly-launched COVID-19 diagnostic tests and emergency medical procedures.
For instance, in March 2020,LabCorp LH announced the availability of the LabCorp 2019 Novel Coronavirus (COVID-19), NAA test. The same month, Becton, Dickinson and Company BDX launched a point-of-care antibody test to confirm current or past exposure to COVID-19. In April, Abbott Laboratories ABT announced the launch of a lab-based serology blood test to detect coronavirus. There have been an endless number of molecular diagnostic, rapid antigen and serology tests launched since then.
Solid consumer adoption of digital health options like remote monitoring technology and robotics-assisted surgery has started buoying investor optimism in the MedTech sector again.
In this regard, it can be mentioned that in June 2020, NextGen HealthCare, Inc. NXGN announced that Nevada Eye Physicians, a comprehensive eye care facility in the Las Vegas area, will be utilizing NextGen Enterprise with integrated telehealth capability called NextGen Virtual Visits. This is likely to bolster NextGen’s presence in the global healthcare information technology (HCIT) space.
Meanwhile, as a major boost to investors, several MedTech firms’ second-quarter results highlighted sequential business improvement through April, May and June as elective procedure volumes started moving toward the pre-pandemic levels.
Ideal Strategy to Follow Now
Based on the ongoing strong recovery, most economists believe that the fourth-quarter organic growth rate of a number of stalwarts within MedTech might catch up to the pre-coronavirus level. Hence, it will be prudent for investors to bet on stocks with strong business fundamentals, long-term growth potential and prices outperforming the industry mark.
The following are a few MedTech companies with a Zacks Rank # 2 (Buy), which offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
OPKO Health, Inc. OPK: This company’s BioReference Laboratories, Inc. along with its specialty oncology division, GenPath, launched OnkoSight Advanced in September. It is a next-generation sequencing (NGS) assay that facilitates revolutionary deoxyribonucleic acid (DNA) mutational profiling of tumor samples.This NGS assay is expected to boost OPKO Health’s Diagnostics segment.
For the next five years, the company’s earnings growth rate is anticipated at 12%, which is favorable compared to the Zacks Medical sector’s 10.7%. Over the past six months, the company’s shares have outperformed the industry. The stock has gained 122.4% compared with the industry’s 31.4% growth.
Merit Medical Systems, Inc. MMSI: This company attained the CE mark for the WRAPSODY Endovascular Stent Graft System from the British Standards Institution (“BSI”) in May. It is a flexible self-expanding endoprosthesis cleared for use in hemodialysis patients for the treatment of stenosis or occlusion within central veins as well as the dialysis outflow circuit of an arteriovenous (AV) fistula or AV graft.
For the next five years, the company’s earnings growth rate is anticipated at 12%, which is favorable compared to the industry’s 9.8%.Over the past six months, the company’s shares have outperformed the industry. The stock has gained 23.8% compared with the industry’s 19.4% rise.
DaVita Inc, DVA: This company’s Kidney Care segment continued delivering strong performance with respect to treatment of Chronic Kidney Disease (CKD) and 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 in their endeavor to treat patients of chronic kidney diseases.
For the next five years, the company’s earnings growth rate is anticipated at 11.9% versus the industry’s 10.6%.
Over the past year, the stock has outperformed the industry. It has gained 45.7% compared with the industry’s 2.4% rally.
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Becton, Dickinson and Company (BDX) : Free Stock Analysis Report
DaVita Inc. (DVA) : Free Stock Analysis Report
Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report
Abbott Laboratories (ABT) : Free Stock Analysis Report
Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report
OPKO Health, Inc. (OPK) : Free Stock Analysis Report
NEXTGEN HEALTHCARE, INC (NXGN) : Free Stock Analysis Report
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