4 Medical Device Stocks Rated 'Buy' in the POWR Ratings

The resumption of the rescheduling of elective surgeries as fewer COVID-19 patients are hospitalized, and an aging population, are driving the demand for medical devices. Investors’ interest in the medical device stocks is evident in the iShares U.S. Medical Devices ETF’s (IHI) 2.5% gains over the past three months and 14.5% year-to-date returns.

The integration of advanced technologies and innovative treatments are expected to drive the medical devices industry’s growth. According to a Research and Markets report, the global medical devices market is expected to grow at a 6.1% CAGR to $661 billion by 2026.

Given this backdrop, we think it could be wise to bet on fundamentally strong medical device stocks Stryker Corporation (SYK), Edwards Lifesciences Corporation (EW), Boston Scientific Corporation (BSX), and Zimmer Biomet Holdings, Inc. (ZBH). These stocks are rated ‘Buy’ in our POWR Ratings system.

Click here to checkout our Healthcare Sector Report for 2021

Stryker Corporation (SYK)

Medical technology company SYK operates through three segments: Orthopaedics; MedSurg; and Neurotechnology and Spine. The Kalamazoo, Mich.-based company sells its products to several healthcare facilities through company-owned subsidiaries and third-party dealers globally.

On September 7, 2021, SYK announced its acquisition of Gauss Surgical, a medical device company that developed Triton. Dylan Crotty, president of Stryker’s Instruments division, said, “Our belief is that Triton technology will help improve the industry standards for quantifying blood loss in the labor and delivery department, furthering Stryker’s commitment to improve safety and outcomes for our caregivers and their patients.”

SYK’s net sales increased 55.4% year-over-year to $4.29 billion in the second quarter, ended June 30, 2021. Its gross profit came in at $2.77 billion, up 79.1% year-over-year. Its net earnings were $592 million compared to an $83 million loss in the year-ago period. Also, its EPS was $1.55 versus a $0.22 loss in the previous period.

Analysts expect SYK’s revenue and EPS to increase 20.5% and 25.4%, respectively, year-over-year to $17.29 billion and $9.32 for its fiscal year 2021. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 8.3% in price to close yesterday’s trading session at $262.05.

SYK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

SYK has a B grade for Growth and Stability. Within the Medical - Devices & Equipment industry, it is ranked #44 of 182 stocks. Click here to see the additional POWR Ratings for Value, Momentum, Sentiment, and Quality for SYK.

Edwards Lifesciences Corporation (EW)

EW in Irvine, Calif., provides products and technologies for structural heart disease and critical care and surgical monitoring in the United States, Europe, Japan, and internationally. The company distributes its products through a direct sales force and independent distributors.

On July 29, 2021, Michael A. Mussallem, EW’s Chairman and CEO, said, "Vaccine adoption in key regions has contributed to an increased number of patients seeking and, most importantly, receiving treatment. This quarter, we were pleased that more than 30,000 patients were treated globally with SAPIEN valves, an indication that more patients are benefiting from our life-changing technologies than ever before."

For its fiscal second quarter, ended June 30, 2021, EW’s net sales increased 48.8% year-over-year to $1.38 billion. The company’s gross profit increased 51.7% from the same period last year to $1.04 billion. Its operating income came in at $542.1 million compared to a $169.7 million loss in the year-ago period. And its EPS was $0.78, versus a $0.20 loss in the previous period.

EW’s revenue is expected to be $5.33 billion in fiscal 2021, representing a 21.4% year-over-year rise. The company’s EPS is expected to increase 21.5% year-over-year to $2.26 in the current year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 26.4% in price to close yesterday’s trading session at $111.09.

It’s no surprise that EW has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Stability and Quality.

EW is ranked #46 in the Medical - Devices & Equipment  industry. Click here to see the additional POWR Ratings for EW (Growth, Momentum, Value, and Sentiment).

Boston Scientific Corporation (BSX)

BSX develops, manufactures, and markets medical devices for use in various interventional medical specialties worldwide. The Marlborough, Mass.-based company operates through three segments: MedSurg; Rhythm and Neuro; and Cardiovascular.

On October 6, 2021, BSX agreed to acquire Baylis Medical Company Inc. Mike Mahoney, BSX’s Chairman and CEO, said, "We believe that Baylis Medical Company will add meaningful revenue, operating income, and new research and development capabilities across multiple Boston Scientific businesses, while complementing existing offerings within our electrophysiology and structural heart portfolios."

BSX’s net sales increased 53.6% year-over-year to $3.08 billion for its fiscal second quarter, ended June 30, 2021. The company’s operating income came in at $262 million, compared to a $71 million loss in the prior year. Its gross profit in the quarter was $2.13 billion, up 75.9% from the year-ago period. And its EPS came in at $0.12 compared to an $0.11 loss per share in the prior year’s quarter.

For its fiscal year 2021, analysts expect BSX’s revenue to be $12 billion, representing a 21.1% year-over-year rise. The company’s EPS is expected to increase 67.7% year-over-year to $1.61 in its fiscal year 2021. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 17.8% in price to close yesterday’s trading session at $42.80.

BSX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Growth.

Click here to see BSX’s ratings for Value, Momentum, Stability, Sentiment, and Quality as well. Again, BSX is ranked #33 in the Medical - Devices & Equipment industry.

Zimmer Biomet Holdings, Inc. (ZBH)

Warsaw, Ind.-based ZBH, together with its subsidiaries, designs, manufactures and markets musculoskeletal healthcare products and solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. 

On August 31, 2021, Robert Kraal, Vice President and General Manager, Connected Health at ZBH, said, “The introduction of mymobility with Apple Watch underscores Zimmer Biomet's commitment to evaluating the real-world clinical benefits of a remote care management platform after orthopedic surgery. These four analyses, utilizing interim data from the ongoing mymobility Clinical Study, suggest that mymobility with Apple Watch may be a viable option to help healthcare professionals monitor how a patient is progressing after surgery and remotely manage rehabilitation regimens to optimize recovery.”

ZBH’s net sales increased 65.3% year-over-year to $2.03 billion in the second quarter, which ended June 30, 2021. Its operating profit came in at $220.50 million compared to a $171.70 million loss in the previous period. Furthermore, its net earnings were $141.90 million, versus a $206.6 million loss in the year-ago period. Also, its EPS came in at $0.67, compared to a $1 loss in the same period.

For its fiscal year 2021, ZBH’s revenue and EPS are expected to grow 15% and 36.9%, respectively, year-over-year to $8.08 billion and $7.76. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 9.7% in price since hitting its 52-week low of $130.05 on October 30, 2020, to close yesterday’s trading session at $144.97.

ZBH’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.

In addition, it has an A grade for Growth, and a B grade for Value. ZBH is ranked #51 in the Medical - Devices & Equipment industry. Click here to see the additional POWR Ratings for ZBH (Momentum, Stability, Sentiment, and Quality).

Click here to checkout our Healthcare Sector Report for 2021

SYK shares were trading at $270.13 per share on Tuesday morning, up $8.08 (+3.08%). Year-to-date, SYK has gained 11.06%, versus a 21.54% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

More...