The effects of pandemic are showing no signs of abating with recent resurgence in coronavirus cases only aggravating apprehensions. Meanwhile, the investors have become increasingly jittery regarding the financial impact of the ongoing crisis on the U.S. economy especially after the second-quarter reporting cycle that reflected a sharp decline of 32.9% in GDP. The decline, which follows a slump of 5% in the first quarter, marked the largest quarterly drop since the Great Depression. The U.S Department of Labor’s September-released data showed real unemployment rate in August exceeding 11%, which made investors further apprehensive about the future ahead.
Historically the month of September has been the worst performing for stocks. With half of this month already behind us, September 2020 is proving to be one of the poorest in that context. Most of the major indexes have tumbled during this period, leading to a looming question — if this is the start of a bigger pullback in the stock market.
Growing uncertainty will pose as September’s biggest overall market risk, resulting in increasing volatility. The presidential election countdown, upcoming fiscal budget debates and the uncertain fate of a second stimulus relief package are likely to pose as potential challenges. Increase in the VIX (or CBOE Volatility Index), which is considered as the market’s fear gauge and reflects future volatility over a monthly time span, has appeared as a red flag for investors.
Amid this volatility, the MedTech sector has emerged resilient as it continues to benefit from the growing worldwide demand for critical products and services. Hence, it may be prudent to invest in this space at the moment to capitalize on its expanding prospects.
MedTech Shows Resilience
Interestingly, there have been areas where MedTech companies have been benefiting hugely from this pandemic and the momentum is likely to sustain for the remainder of the year as well. Digital health and diagnostic testing being the prime examples.
The pandemic fueled rapid growth and adoption of digital health technologies such as telemedicine and remote patient monitoring, which helped the companies involved in the same to gain significantly from it. Prospects of diagnostic testing are also immense as some of the key molecular diagnostic players are showing potential on account of rigorous work on development of diagnostic testing for the coronavirus and attaining regulatory approvals for them.
3 Top MedTech Picks to Add to Your Portfolio Now
Despite the market volatility, investors might take a look at these three stocks that have capitalized on the COVID-19 pandemic and is likely to sustain their momentum for the rest of the year based on their strong fundamentals.
Fresenius Medical Care AG & Co. KGaA FMS is a key integrated provider of products and services for dialysis patients. In July, this Zacks Ranked #2 (Buy) company with a VGM Score of A reported solid second-quarter 2020 results. A wide range of dialysis products and services instills optimism in the stock. Management expects to undertake meaningful investments in 2020 to capitalize on opportunities and optimize cost base. Per the postulates of the ‘Growth Strategy 2020’, the company aims to boost revenues to $28 billion by 2020.
The company has an expected long-term earnings growth of 7.7%. For 2020, the Zacks Consensus Estimate for revenues is pegged at $21.46 billion, indicating an improvement of 9.7% from the previous year. The same for adjusted earnings per share stands at $2.57, suggesting growth of 1.6%. Further, its Earnings Yield or E/P ratio is 6.1% against the industry’s negative ratio. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Year to date, shares of this company have gained 16.7%, compared with the industry’s rally of 16.1%.
Hologic, Inc. HOLX develops, manufactures, and supplies diagnostics, medical imaging systems and surgical products, which cater to the healthcare needs of women. Hologic’s management is impressed with continued growth in the core molecular diagnostics sub-segment that accounted for 86.5% of total Diagnostics revenues in the fiscal third quarter. Molecular Diagnostics sales increased 170.3% at constant exchange rate or CER. Global revenues for molecular diagnostics improved 114%. In May, Hologic received the FDA’s EUA for its Aptima SARS-CoV-2 assay (that runs on the company’s fully automated Panther system) for the detection of the COVID-19 causing virus. The company generated solid revenues from strong customer adoption of Hologic’s two SARS-CoV-2 assays that run on the Panther and Panther Fusion systems. Following the robust demand for the assays, Hologic is on track to scale up its molecular diagnostics manufacturing capacity.
For fiscal 2020, the consensus mark for revenues for this Zacks Rank #1 stock is pegged at $3.46 billion, indicating an improvement of 2.9% from the prior year. The same for adjusted earnings per share stands at $3.03, suggesting growth of 24.7%. Further, its Earnings Yield or E/P ratio is 4.9% against the industry’s negative ratio.
Year to date, shares of this company have gained 21.1%, compared with the industry’s rally of 16.1%.
Thermo Fisher Scientific, Inc. TMO, a scientific instrument maker and a world leader in serving science, has taken significant strides with respect to coronavirus testing. The company’s real-time PCR test has got FDA’s EUA and CE mark in the European Union. In May, the company received an expanded EUA for its multiplex real-time PCR test intended for the qualitative detection of nucleic acid from SARS CoV 2. It also progressed with highly specialized viral transport media (VTM) for sample collection. At the end of second-quarter 2020, the company noted that, its PCR-based workflow is widely utilized in 50 countries. The company ended the quarter with enough capacity to produce more than 10 million tests per week. Further, in terms of the development of therapeutics and vaccines, Thermo Fisher is partnering with a number of pharma and biotech customers who are working on coronavirus-related projects.
The Zacks Rank #2 stock has an expected long-term earnings growth of 15.5%. For 2020, the Zacks Consensus Estimate for revenues is pegged at $28.74 billion, indicating an improvement of 12.5% from the previous year. The same for adjusted earnings per share stands at $15.78, suggesting growth of 27.8%. Further, its Earnings Yield or E/P ratio is 3.6% against the industry’s negative ratio.
Year to date, shares of this company have gained 33.2%, compared with the industry’s growth of 16.1%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
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Hologic, Inc. (HOLX) : Free Stock Analysis Report
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