The healthcare industry has been lifted into the spotlight by the coronavirus pandemic. The lasting side effects of the COVID-19, combined with inactive lifestyles, has raised people’s awareness of their own health issues like few events have before. Moreover, the U.S. is seeing an increase in chronic ailments, in-part due to an ageing population, which will demand more treatment and medical care over time.
The production of general medical equipment was severely impacted this year as COVID-19 PPE kits became the priority of several medical equipment manufacturers. Also, the fear of virus transmission impelled patients to defer their elective medical procedures, significantly reducing the demand for non-COVID medical equipment.
Nevertheless, medical technology companies have continued innovating with future demand in mind. With the likelihood that the ongoing coronavirus vaccination drive will control the virus’ spread in the foreseeable future, we believe Stryker Corporation (SYK), Edwards Lifesciences Corporation (EW), and Align Technology, Inc. (ALGN) have the potential to deliver impressive results in 2021.
Stryker Corporation (SYK)
SYK develops and supplies medical technology products and services through three segments: Orthopaedics, MedSurg, and Neurotechnology and Spine. The company sells its products through subsidiaries, branches, and third-party dealers and distributors in approximately 75 countries.
SYK acquired Wright Medical Group N.V. (WMGI), an extremities and biologics focused medical device company, in November. This was done to boost SYK’s global market position in the global medical devices market.
SYK’s revenues have increased 4.2% year-over-year to $3.74 billion in the third quarter ended September 30, 2020. Non-GAAP operating profit increased 36.8% from the year-ago value to $859 million, while Non-GAAP EPS rose 32.5% from the same period last year to $1.63.
Analysts expect SYK’s revenues to rise 4.7% to $4.32 billion for the current quarter ending December 31, 2020. The company has an impressive earnings surprise history; it beat the Street EPS estimates in the trailing four quarters. The consensus EPS estimate of $2.56 for the current quarter represents a slight improvement from the year-ago value. SYK has gained 27.1% over the past six months.
How does SYK stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
A for Industry Rank
A for Overall POWR Rating.
The stock is currently ranked #3 of 144 stocks in the Medical - Devices & Equipment Industry.
Edwards Lifesciences Corporation (EW)
EW is a patient-focused medical corporation that delivers structural heart disease and critical and surgical care monitoring. Its products are categorized into three areas: Transcatheter Heart Valve Therapy, Surgical Heart Valve Therapy and Critical Care, which it distributes through a direct sales force and independent distributors.
This month, EW received Health Canada’s approval to expand the use of its SAPIEN 3 and SAPIEN 3 Ultra transcatheter heart valves for treating patients diagnosed with aortic stenosis. Previously, only patients with certain specified risk scores were considered for the treatment. The regulatory approval should significantly increase the number of patients considered.
EW’s revenue has increased 4.3% year-over-year to $1.14 billion in the fiscal third quarter ended September 30, 2020. Its non-GAAP operating profit has increased 9.2% from the year-ago value to $358.2 million, while Non-GAAP EPS rose 8.5% from the same period last year to $0.51.
Analysts expect EW’s revenue to rise slightly by 1.3% to $1.19 billion for the current quarter ending December 31, 2020. The company has an impressive earnings surprise history as well; it beat the Street EPS estimates in three out of the trailing four quarters. The consensus EPS estimate of $0.53 for the current quarter represents an 8.2% improvement from the year-ago value. The stock has gained 26.1% over the past six months.
EW’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade and Industry Rank and “B” for Peer Grade. Among the 144 stocks in the same industry, it is ranked #4.
Align Technology, Inc. (ALGN)
ALGN engages in the design, manufacture, and marketing of Invisalign clear aligners and iTero intraoral scanners. It primarily serves orthodontists and restorative and aesthetic dentistry through the Clear Aligner, and Scanner and Services segments.
In October, ALGN announced the commercial availability of its proprietary ClinCheck Pro 6.0 and ClinCheck "In-Face" visualization software for Invisalign treatment. ClinCheck Pro 6.0 will enhance the mobility of treatment planning tools and features using cloud, while the "In-Face" visualization will help doctors with their digital treatment planning.
In late October, ALGN entered an agreement with Gresham Worldwide’s wholly owned subsidiary, Enertec Systems 2001, Ltd to develop medical testing facilities. Enertec is a leading provider of customized technology solutions for applications in the defense, aerospace, and medical industries in Israel. This will enable ALGN to explore the Israeli markets.
ALGN’s revenue has increased 20.9% year-over-year to $734.14 million in its fiscal third quarter ended September 30, 2020. Non-GAAP operating margin increased 420 basis points from the year-ago value to 28%, while Non-GAAP EPS rose 52% from the same period last year to $2.25.
Analysts expect ALGN’s revenue to rise 20.4% in the current quarter (ending December 31, 2020) to $782.63 million. The consensus EPS estimate of $2.11 for the current quarter represents a 37.9% improvement from the year-ago value. ALGN has gained 106% over the past six months.
It is no surprise that ALGN is rated a “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is currently ranked #6 of 144 stocks in the same industry.
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SYK shares . Year-to-date, SYK has gained 13.67%, versus a 16.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands.
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