The integration of AI in healthcare is continuously transforming the operations and processes of the medical field. Companies engaged in the healthcare industry are leveraging artificial intelligence (AI) to advance patients’ care and lower costs propelling the medical technology market.
Amid this backdrop, investors could consider investing in sound medtech stocks Baxter International Inc. (BAX), Zimmer Biomet Holdings, Inc. (ZBH), and Embecta Corp. (EMBC) which are poised for high-growth.
Technology has revolutionized the healthcare segment with cutting-edge devices and innovations resulting in enhanced outcomes, lower costs, and improved access to care. These innovations led to FDA approvals of 171 artificial intelligence and machine learning (AI/ML)-enabled medical devices for human use. Also, Generative AI and AI-enabled devices in medtech will remain in focus this year.
The medical technology market revenue is projected to reach $598.90 billion in 2024 worldwide with medical devices market likely to dominate. The medical technology market is expected to grow at a CAGR of 5.3%, resulting in a market volume of $775.80 billion by 2029. The US is poised to generate highest revenue of $210 billion by 2024 due to increased investment in R&D.
Further, with AI driving innovation in diagnostics, personalized care, and operational efficiency, the artificial intelligence in the medical device industry is flourishing. Medical companies are increasingly adopting AI technologies to enhance their operations and patient care. The market is poised to grow to $97.07 billion by 2028, growing at a CAGR of 44.4%.
Given these favorable market trends, let’s look at the fundamentals of the top three Medical – Devices & Equipment stocks, beginning with the third choice.
Stock #3: Baxter International Inc. (BAX)
BAX develops and provides a portfolio of healthcare products worldwide. The company operates in four segments: Medical Products and Therapies; Healthcare Systems and Technologies; Pharmaceuticals; and Kidney Care.
On August 13, BAX and funds managed by global investment firm Carlyle (CG) signed a definitive agreement under which Carlyle will acquire BAX’s Kidney Care segment, to be named Vantive, for $3.80 billion.
The transaction marks a key milestone in BAX’s ongoing business transformation, allowing heightened strategic clarity, operational efficiency and innovation. It also provides increased flexibility to deploy capital toward opportunities to accelerate Baxter’s and Vantive’s respective growth objectives
On July 30, BAX launched the Helion Integrated Surgical System in Thailand. With the help of operating room integration and cutting-edge technology, Helion simplifies operating rooms to help healthcare institutions in Thailand boost OR efficiency and keeping surgical teams focused and connected.
BAX’s net sales increased 2.8% year-over-year to $3.81 billion for the second quarter that ended June 30, 2024. The company’s adjusted operating income grew 6.7% from the year-ago value to $522 million. Adjusted net income attributable to Baxter stockholders and adjusted EPS came in at $345 million and $0.68, indicating growth of 3% year-over-year, respectively.
As per the company guidance, BAX expects sales growth of 4% - 5% and adjusted EPS of $0.77 - $0.79 for the third quarter 2024. Further, for the full fiscal 2024, it expects sales growth of 3% and its adjusted EPS is expected to range between $2.93 and $3.01.
Street expects BAX’s revenue and EPS for the third quarter (ending September 2024) to increase 3.6% and 14.1% year-over-year to $3.84 billion and $0.78, respectively. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
BAX’s stock has increased 6.4% over the past month to close the last trading session at $37.54.
BAX’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. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Growth and a B grade for Value. Within the Medical – Devices & Equipment industry, BAX is ranked #27 out of 135 stocks.
Click here to access additional ratings of BAX for Momentum, Sentiment, Quality, and Stability.
Stock #2: Zimmer Biomet Holdings, Inc. (ZBH)
ZBH operates as a medical technology company globally. The company designs, manufactures, and markets orthopedic reconstructive products, like knee and hip products, S.E.T. products, and craniomaxillofacial and thoracic products.
On August 7, ZBH signed a definitive agreement to acquire OrthoGrid Systems, Inc., a privately-held medical technology company focused on AI-driven surgical guidance systems for total hip replacement. The acquisition includes OrthoGrid's AI-powered, fluoroscopy-based surgical assistance platform Hip AI®, and its FDA-cleared orthopedic applications and over 40 patents.
The strategic acquisition will expand ZBH’s hip portfolio with artificial intelligence-driven surgical guidance system.
On June 12, ZBH and RevelAi Health entered into a multi-year co-marketing agreement to commercialize generative AI-powered engagement solutions to advance value-based orthopedic care and health equity. Under the agreement, ZBH Biomet will commercialize RevelAi Health's patient care-management platform, care team dashboard for providers, and any future products or services.
ZBH’s revenue and EBITDA have grown at respective CAGRs of 0.7% and 3.3% over the past three years. The company’s EBIT has increased 6.3% over the same timeframe, while its net income and EPS have improved at CAGRs of 2.9% and 3%, respectively.
During the second quarter that ended on June 30, 2024, ZBH’s net sales increased 3.9% year-over-year to $1.94 billion, and its adjusted gross profit increased 3.3% year-over-year to $1.39 billion. The company’s adjusted operating profit grew 7.4% from the year-ago value to $552.60 million.
In addition, net earnings of ZBH and EPS came in at $242.80 million and $1.18, reflecting increases of 15.8% and 18% from the prior year’s quarter, respectively.
As per the company guidance for the full year 2024, ZBH expects revenue change of 4.0% - 5.0% and its adjusted EPS is expected between $8 and $8.15.
Analysts expect ZBH’s revenue for the third quarter (ending September 2024) to grow 4.7% year-over-year to $1.84 billion and its EPS for the same period is expected to increase 9.3% year-over-year to $1.80. Furthermore, the company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
ZBH’s shares have gained 4.7% over the past month and marginally over the past year to close the last trading session at $115.05.
ZBH’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Value, Growth, and Quality. Within the Medical – Devices & Equipment industry, ZBH is ranked #24 out of 135 stocks.
In addition to the POWR Ratings we’ve stated above, we also have ZBH ratings for Stability, Momentum, and Sentiment. Get all ZBH ratings here.
Stock #1: Embecta Corp. (EMBC)
EMBC is a medical device company which focuses on the provision of various solutions to enhance the health and wellbeing of people living with diabetes. The company’s portfolio include pen needles, syringes, and safety injection devices, and digital applications to assist people with managing patient's diabetes.
On August 9, EMBC’s Board of Directors declared a quarterly cash dividend of $0.15 for each issued and outstanding share of its common stock. The dividend is payable on September 13, 2024 to stockholders of record at the close of business on August 27, 2024.
EMBC pays an annual dividend of $0.60, which translates to a yield of 4.29% at the current share price. Its four-year average dividend yield is 2.33%.
EMBC reported revenues of $272.50 million for the third quarter that ended June 30, 2024, and its adjusted gross profit grew marginally from the year-ago value to $190.30 million. The company’s adjusted operating income of $83.30 million indicates a growth of 4.4% from the prior year’s quarter.
Furthermore, the company’s adjusted net income came in at $43 million and $0.74 per share, up 8% and 7.2% year-over-year, respectively.
As per the company’s fiscal year 2024 outlook, EMBC expects its revenues between $1.11 billion and $1.12 billion. The company also revised its adjusted EPS to range from $2.30 to $2.35, compared to the previous guidance of $2.20 - $2.30.
Street expects EMBC’s revenue for the fiscal year 2024 (ending September 2025) to increase marginally year-over-year to $1.12 billion and its EPS for the same year is expected to be $2.26. Also, the company has topped the consensus revenue and EPS estimate in all four trailing quarters, which is remarkable.
Shares of EMBC have surged 7.8% over the past three months to close the last trading session at $14.
EMBC’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
EMBC has an A grade for Value and Quality. It also has a B for Growth. The stock has topped among the 135 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have EMBC ratings for Sentiment, Momentum, and Stability. Get all EMBC ratings here.
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ZBH shares were trading at $115.26 per share on Monday afternoon, up $0.21 (+0.18%). Year-to-date, ZBH has declined -4.90%, versus a 18.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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