As innovation continues to shape nearly every industry, the medical sector is no exception. Now, you might wonder how the technology can influence the medical industry. The MedTech sector is innovating across various areas, including medical devices, diagnostics, digital health platforms, and robotic surgery.
These technological breakthroughs are creating unique opportunities for investors to invest in fundamentally sound companies like Medtronic plc (MDT), STERIS plc (STE), and Hologic, Inc. (HOLX), which are innovating and advancing life-saving devices.
Over the past few years, the MedTech sector has experienced explosive growth, reshaping the healthcare industry in ways we never imagined, and it’s showing no signs of slowing down. From $456.9 billion in 2020, the MedTech market is expected to soar to $800 billion by 2030. It’s not just the numbers that are growing; healthcare companies are increasingly merging with MedTech firms to enhance their capabilities and gain a competitive edge.
Moreover, AI has been a game-changer in MedTech, driving breakthroughs in predictive diagnostics, remote monitoring, and precision medicine. With these advancements, the global market for medical devices is forecasted to hit $1.2 billion by 2027, exhibiting a CAGR of 29.1%.
Several factors fuel the growth of MedTech stocks, including an aging global population, the rising prevalence of chronic diseases, and a strong push toward digital transformation. As demand for more effective, efficient, and accessible healthcare solutions increases, MedTech companies are well-positioned to capitalize on these trends, making them a compelling investment opportunity for investors.
Considering these conducive trends, let’s examine the Medical - Devices & Equipment industry stocks in detail, beginning with the third choice:
Stock #3: Medtronic plc (MDT)
Headquartered in Dublin, Ireland, MDT provides healthcare technology solutions. It develops, manufactures, and sells device-based medical therapies to healthcare systems, physicians, clinicians, and patients worldwide. The company operates through four segments: Cardiovascular Portfolio; Neuroscience Portfolio; Medical Surgical Portfolio; and Diabetes Operating Unit.
On August 15, the company’s board of directors approved a second-quarter dividend of $0.70 per share for fiscal year 2025, consistent with the company’s previous dividend increase announced in May. The dividend will be paid on October 11, 2024, to shareholders of record as of September 27, 2024.
As a member of the S&P 500 Dividend Aristocrats, MDT has raised its annual dividend for 47 consecutive years. It pays an annual dividend of $2.80 per share, which translates to a yield of 3.13% on the prevailing share price. Also, its four-year average dividend yield is 2.75%.
On August 7, MDT announced that the U.S. Food and Drug Administration (FDA) approved its Simplera™ continuous glucose monitor (CGM). It is the company’s first disposable, all-in-one CGM, which is half the size of previous models and easier to use.
Additionally, the company revealed a global partnership with Abbott to create an integrated CGM based on Abbott’s latest technology, exclusively compatible with MDT’s smart insulin device. The company will sell this system exclusively and expects the partnership to boost its Diabetes revenue while maintaining its gross margin.
MDT’s net sales for the first quarter (ended July 26, 2024) increased 2.8% year-over-year to $7.92 billion. Its non-GAAP operating profit grew 2.3% from the prior year’s quarter to $1.95 billion. The company’s attributable net income rose 31.7% from the year-ago value to $1.04 billion, while its non-GAAP EPS stood at $1.23, up 2.5% year-over-year.
The company has updated its fiscal year 2025 outlook, increasing its revenue growth projection to a range of 4.5% to 5%, up from the previous estimate of 4% to 5%. Additionally, it has adjusted its non-GAAP EPS guidance to a new range of $5.42 to $5.50, slightly higher than the prior forecast of $5.40 to $5.50. This revised guidance suggests a 4% to 6% growth in non-GAAP EPS.
The consensus revenue estimate of $8.41 billion for the fiscal third quarter (ending January 2025) represents a 3.9% increase year-over-year. The consensus EPS estimate of $1.37 for the same quarter indicates a 5.6% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has surged 13.5%, closing the last trading session at $89.39.
MDT’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
MDT has a B grade for Stability. It is ranked #19 out of 132 stocks in the Medical - Devices & Equipment industry. Click here to see the additional ratings for MDT (Growth, Value, Momentum, Sentiment, and Quality).
Stock #2: STERIS plc (STE)
STE is a provider of products and services that support patient care with an emphasis on infection prevention worldwide. It operates through three segments: Healthcare; Applied Sterilization Technologies (AST); and Life Sciences.
On July 31, buoyed by strong financial performance, the company increased its quarterly interim dividend by $0.05 to $0.57 per share, payable to its shareholders on September 20, 2024.
With 19 years of consecutive dividend growth, STE pays an annual dividend of $2.28, which translates to a yield of 0.95% at the current share price. Its four-year average dividend yield is 0.86%. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 9.3% over the past three years.
For the first quarter of 2024, which ended on June 30, STE’s total revenues increased 8.1% year-over-year to $1.28 billion, while its gross profit stood at $572.43 million, up 8.2% year-over-year. Its net income attributable for the quarter amounted to $145.40 million or $1.46 per share, representing an increase of 17.7% and 16.8%, respectively, from the same period last year. Also, the company’s net cash flow from operating activities grew 8% from the year-ago value to $303.74 million.
As per the updated guidance for the fiscal year 2025, STE forecasts revenue from continuing operations to increase 6.5% to 7.5% from 2024. The company also expects adjusted EPS from continuing operations between $9.05 and $9.25 and free cash flow to be approximately $700 million.
Analysts expect STE’s revenue for the fiscal year ending March 2025 to grow marginally year-over-year to $5.50 billion, while its EPS for the same period is expected to increase 3.8% from the prior year to $9.16.
STE shares have surged 20.4% over the past nine months to close the last trading session at $239.05.
STE’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has a B grade for Growth, Stability, and Sentiment. Within the same industry, it is ranked #13 out of 132 stocks. Click here to see STE’s ratings for Value, Momentum, and Quality.
Stock #1: Hologic, Inc. (HOLX)
HOLX is a medical technology company focused on improving women’s health and well-being through early detection and treatment. It is a developer, manufacturer, and supplier of diagnostics products, medical imaging systems, and surgical products worldwide. The company operates through four segments: Diagnostics; Breast Health; GYN Surgical; and Skeletal Health.
On July 25, HOLX acquired Endomagnetics Ltd., a privately held UK-based developer of breast cancer surgery technologies, for $310 million. This acquisition enhances access to Endomag’s innovative technologies, diversifying HOLX’s expanding interventional breast health portfolio.
In the fiscal third quarter that ended on June 29, 2024, HOLX’s total revenue increased 2.7% year-over-year to $1.01 billion with a non-GAAP gross margin of 61.1% (up 30 bps year-over-year). The company reported income from operations of $244 million, indicating a significant growth from the prior year quarter. Its adjusted EBITDA increased 8.5% year-over-year to $338.50 million.
HOLX’s non-GAAP net income came in at $250.70 million, up 8.4% year-over-year, while its non-GAAP EPS grew 14% from the year-ago value to $1.06.
For the fourth quarter of the fiscal year 2024, the company’s revenue is projected to be between $970 million and $985 million, with EPS anticipated to fall between $0.80 and $0.87. On a consolidated adjusted basis, its non-GAAP EPS is expected to range from $0.97 to $1.04.
Street expects HOLX’s revenue for the fiscal fourth quarter (ending September 2024) to increase 3.4% year-over-year to $977.72 million. Its EPS for the same period is expected to register a 13.8% growth from the prior year, settling at $1.01. In addition, it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is promising.
Shares of HOLX have gained 16.9% over the past nine months to close the last trading session at $80.99.
It’s no surprise that HOLX has an overall rating of B, equating to a Buy in our POWR Ratings system. It has a B grade for Growth and Quality. Out of 132 stocks in the Medical - Devices & Equipment industry, HOLX is ranked #10.
Beyond what is stated above, we’ve also rated HOLX for Value, Momentum, Stability, and Sentiment. Get all HOLX ratings here.
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MDT shares were trading at $89.88 per share on Friday afternoon, up $0.49 (+0.55%). Year-to-date, MDT has gained 10.98%, versus a 14.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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