Uncovering the Investment Prospects of Agilent Technologies (A) and Medtronic (MDT)

The medical industry is growing due to the adoption of advanced technologies and innovations in digital in-vitro and quick point-of-care diagnostics. Given the industry growth prospects, investing in prominent medical stocks Agilent Technologies, Inc. (A) and Medtronic plc (MDT) could be wise.

Before diving deeper into the fundamentals of these stocks, let’s discuss what’s shaping the medical industry’s prospects.

Innovative medical technologies are shaping the medical industry by enabling early detection of diseases and addressing health threats. The industry's growth is driven by factors like a growing global aging population, increased incidence of chronic illnesses, and a rising demand for personalized medicine and precision diagnostics.

The diagnostics industry is also expanding as automated platforms for disease prevention, detection, and management gain popularity. Health service providers are increasingly utilizing clinical diagnostics to tailor therapies through rigorous tests. The global clinical diagnostics market is anticipated to reach $105.91 billion, growing at a 6.1% CAGR by 2028.

Likewise, the medical devices market is set to grow from $595.42 billion in 2023 to $834.72 billion by 2028, marking a 6.9% CAGR, driven by factors such as the rise in chronic diseases, technological advancements, an aging population, and global demand for effective treatments.

On top of it, the digital health platform is rapidly evolving, driven by widespread smartphone use and the global surge in health-centric apps. This sector is poised for further growth with significant investments in healthcare IT infrastructures worldwide, in both developing and advanced nations.

The global digital health market is expected to exceed $780.05 billion by 2030, growing at a 16.1% CAGR.

Now, let’s take a look at the fundamentals of the two medical stock picks:

Agilent Technologies, Inc. (A)

A provides application-focused solutions to the life sciences, diagnostics, and applied chemical markets worldwide. It operates in three segments: Life Sciences and Applied Markets, Diagnostics and Genomics, and Agilent CrossLab.

On November 14, 2023, A announced FDA approval for its PD-L1 IHC 22C3 pharmDx as a diagnostic tool for identifying patients with Gastric or Gastroesophageal Junction (GEJ) Adenocarcinoma eligible for treatment with KEYTRUDA (pembrolizumab). This approval marks the sixth cancer type for which PD-L1 IHC 22C3 pharmDx has gained FDA approval.

On September 19, 2023, A signed a Research Collaboration Agreement with the National Cancer Centre Singapore (NCCS) to advance genomic profiling on Asian-prevalent cancers. The collaboration, spanning two years, involves supplying A's Magnis Next-Generation Sequencing Preparation System to enhance translational cancer research.

Chow Woai Sheng, Singapore General Manager and VP of Instrument Manufacturing at A, said, “As a world-leading diagnostic supplier, Agilent adds value for its customers and this latest agreement further boosts our long-term relationship in this important market. We are ready to continue meeting Singapore’s molecular testing needs in the genetic aspects of cancer and other diseases.”

In terms of the trailing-12-month EBITDA margin, A’s 25.29% is 384.5% higher than the 5.22% industry average. Likewise, its 0.66x trailing-12-month asset turnover ratio is 71.8% higher than the 0.38x industry average. Furthermore, the stock’s 12.67% trailing-12-month levered FCF margin is significantly higher than the industry average of 0.11%.

A’s net revenue for the fiscal fourth quarter that ended October 31, 2023, came in at $1.69 billion. Likewise, its non-GAAP net income and non-GAAP net income per share came in at $404 million and $1.38, respectively.

Moreover, Street expects A’s EPS for the quarter ending April 30, 2023, to increase 0.1% year-over-year to $1.27, while its revenue for the quarter ending July 31, 2024, is expected to increase 2.8% year-over-year to $1.72 billion. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 13.5% to close the last trading session at $123.92.

A’s POWR Ratings reflect strong prospects. It has an overall rating of B, which translates to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It is ranked #9 out of 46 stocks in the Medical - Diagnostics/Research industry. It has a B grade for Quality. Click here to see A’s Growth, Value, Momentum, Stability, and Sentiment rating.

Medtronic plc (MDT)

Headquartered in Dublin, Ireland, MDT develops, manufactures, and sells device-based medical therapies to healthcare systems, physicians, clinicians, and patients worldwide. It operates through the Cardiovascular Portfolio, Medical Surgical Portfolio, Neuroscience Portfolio, and Diabetes Operating Unit segment.

On November 17, 2023, MDT announced FDA approval for the Symplicity Spyral renal denervation (RDN) system, also known as the Symplicity blood pressure procedure. This minimally invasive device for treating hypertension is now approved for commercial use in over 70 countries worldwide after ten years of clinical research and development, offering a new treatment option for patients.

Jason Weidman, Senior VP and President of the Coronary and Renal Denervation Business at MDT stated that MDT has always believed in the potential of this therapy. They partnered closely with clinical experts to bring the technology to those who need it most. The approval of the Symplicity blood pressure procedure is a significant milestone for physicians and patients in hypertension treatment.

In terms of the trailing-12-month gross profit margin, MDT’s 65.97% is 17.8% higher than the 55.99% industry average. Its 26.41% trailing-12-month EBITDA margin is 405.8% higher than the 5.22% industry average. Moreover, the stock’s 14.93% trailing-12-month levered FCF margin is significantly higher than the 0.11% industry average.

For the fiscal second quarter that ended October 27, 2023, MDT’s non-GAAP net sales increased 5.3% year-over-year to $7.98 billion. Its operating profit came in at $2.01 billion. Also, the company’s non-GAAP net income attributable to MDT came in at $1.67 billion, while its non-GAAP earnings per share came in at $1.25.

For the quarter ending January 31, 2024, MDT’s revenue is expected to increase 3.3% year-over-year to $7.98 billion. Its EPS for the quarter ending July 31, 2024, is expected to increase 5% year-over-year to $1.26. It surpassed the consensus EPS estimate in each of the trailing four quarters. Over the past month, the stock has gained 8.1% to close the last trading session at $78.62.

MDT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.

It has a B grade for Growth, Value, Stability, and Sentiment. It is ranked #5 out of 144 stocks in the Medical - Devices & Equipment industry. To see MDT’s Momentum and Quality ratings, click here.

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A shares were unchanged in premarket trading Wednesday. Year-to-date, A has declined -16.73%, versus a 19.84% rise in the benchmark S&P 500 index during the same period.

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.

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