The medical devices industry has marked significant growth since the pandemic due to mass vaccination rollouts, increased sales of medical devices related to COVID-19 prevention and management, and increased government support to strengthen the healthcare system.
Rapid capital investment and technological advancements like artificial intelligence (AI) and smart gadgets have positioned this industry for solid long-term growth. The medical devices market is expected to reach $964.90 billion by 2030, growing at a 7% CAGR.
Moreover, an aging population, a surge in chronic diseases, and increased health consciousness among the masses should help the healthcare industry witnessing high demand. The U.S. healthcare spending is projected to grow at approximately 4.9% per year from 2022-2024 and 5.3% per year beyond that, hitting $6.80 trillion in 2030.
The stock market has seen a massive sell-off amid high inflation and the Fed’s aggressive rate hikes. Despite macroeconomic uncertainties, the healthcare sector performed relatively well due to inelastic demand for its products and services.
Thus, investors could consider buying fundamentally solid medical device stocks Medtronic plc (MDT) and Edwards Lifesciences Corporation (EW).
Medtronic plc (MDT)
Headquartered in Dublin, Ireland, MDT develops, distributes, and sells device-based medical therapies to hospitals, physicians, clinicians, and patients worldwide. It operates through four segments: Cardiovascular Portfolio; Neuroscience Portfolio; Medical-Surgical Portfolio; and Diabetes Operating Unit.
On November 2, MDT announced the launch of Medtronic Neurovascular Co-Lab™, an innovation process, and platform designed to gather new ideas for stroke treatment and quickly develop therapies to improve patient outcomes. This should enable the company to provide new ways for enhanced stroke care.
MDT paid its last quarterly dividend of $0.68 on October 14, 2022. The company has eight consecutive years of dividend growth. Its $2.72 annual dividend yields 3.26% at its current share price. Over the past three and five years, MDT’s dividend payouts have grown at an 8% CAGR.
For the fiscal quarter ended July 29, 2022, MDT’s net sales came in at $7.37 billion. Its operating profit increased 31% year-over-year to $1.13 billion, while net income attributable to MDT increased 21.8% year-over-year to $929 million. Also, the company’s EPS came in at $0.70, representing an increase of 25% from the prior-year quarter.
Analysts expect MDT’s EPS and revenue for the fiscal third quarter ending January 2023 to increase 2.5% and 2.6% year-over-year to $1.40 and $7.96 billion, respectively. The company surpassed Street EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 1.6% over the past month to close the last trading session at $82.90.
MDT has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has a B grade for Stability and Value. MDT is ranked #11 out of 141 stocks in the Medical – Devices & Equipment industry.
Click here to access MDT’s ratings for Growth, Momentum, Sentiment, and Quality.
Edwards Lifesciences Corporation (EW)
EW manufactures heart valve systems and repair products used to replace or repair a patient’s diseased or defective heart valve. The Irvine, Calif.-based company is engaged in patient-focused innovations for structural heart disease and critical care monitoring.
On November 1, EW announced a $750 million accelerated share repurchase agreement, bringing the company’s aggregate repurchase to more than $1.7 billion shares in 2022. The company aims to fund the share repurchase with its existing cash. This demonstrates the strong cash positioning of the company.
EW’s net sales increased marginally year-over-year to $1.32 billion in its fiscal third quarter ended September 30. Its operating income stood at $402.40 million, up 3.1% from the same period last year. Its net income came in at $343.50 million, while its EPS increased 1.9% year-over-year to $0.55.
The consensus revenue estimate of $1.36 billion for the fiscal first quarter ending March 2023 indicates a 1.5% year-over-year improvement. Analysts expect the company’s EPS to come in at $0.62 in the same quarter, reflecting a 2.5% rise year-over-year.
EW’s stock slumped 1.5% intraday to close the last trading session at $73.51.
It is no surprise that EW has an overall B rating, which equates to a Buy in our proprietary rating system. It also has a B grade for Stability and Quality. In the same industry, EW is ranked #20.
Beyond what we have stated above, we have also rated EW for Growth, Value, Momentum, and Sentiment. Click here to view all EW ratings.
MDT shares were trading at $83.42 per share on Tuesday morning, up $0.52 (+0.63%). Year-to-date, MDT has declined -17.60%, versus a -14.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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