Because medical procedures and surgeries were divided into essential and non-essential during the pandemic, with priority accorded to COVID-19 cases, companies that market other medical devices suffered as non-essential surgeries and therapies were postponed or canceled.
However, with the significant decline in COVID-19 cases, non-essential surgeries are being rescheduled this year. After fully vaccinating 48.2% of the U.S. population, the focus is now being shifted to treating other critical diseases also. This, combined with big tech giants’ interest in the healthcare sector, is expected to drive the leading players in the medical devices industry to innovate user-friendly, sustainable and efficient medical devices. Indeed, the global medical device market is expected to grow at 5% CAGR to $623 Billion by 2026.
Resurgent investor interest in the industry is evident in the iShares U.S. Medical Devices ETF’s (IHI) 5% returns compared to the SPDR S&P 500 Trust ETF’s (SPY) 2.6% gains over the past month.
Given this backdrop, Intuitive Surgical, Inc. (ISRG), Stryker Corporation (SYK), and Edwards Lifesciences Corporation (EW) appear ideal investment bets now.
Click here to checkout our Healthcare Sector Report for 2021
Intuitive Surgical, Inc. (ISRG)
ISRG designs, manufactures, and markets primarily the da Vinci surgical system and Ion endoluminal system, and related instruments and accessories for invasive surgery worldwide.
ISRG’s net revenues for its fiscal first quarter, ended March 31, 2021, increased 17.5% year-over-year to $1.29 billion. The company’s non-GAAP gross profit has been reported at $927.80 million, up 21.1% from the prior-year period. Its non-GAAP income from operations came in at $527.30 million, which represents a 37.2% year-over-year improvement. While its non-GAAP net income increased 32.3% year-over-year to $234 million, its non-GAAP EPS increased 30.9% year-over-year to $3.52. The company had $1.40 billion in cash and cash equivalents as of March 31, 2021.
A $3.20 consensus EPS estimate for the current quarter, ending September 30, 2021, represents a 15.5% improvement year-over-year. ISRG surpassed consensus EPS estimates in each of the trailing four quarters. A $1.31 billion consensus revenue estimate for the current quarter represents a 34.6% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 10.8% rate per annum over the next five years. The stock has gained 67.4% over the past year and 20.4% over the past three months. It closed yesterday’s trading session at $955.08.
ISRG’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, 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.
The stock has a B grade for Quality, Sentiment, and Growth as well. Click here to see more of ISRG’s POWR Ratings (Stability, Value, and Momentum).
ISRG is ranked #55 of 184 stocks in the Medical - Devices & Equipment industry.
Stryker Corporation (SYK)
SKY is a medical technology company that offers orthopedic, medical and surgical, along with neurotechnology and spine products. The company serves doctors, hospitals, and other healthcare facilities through company-owned subsidiaries and branches, as well as third-party dealers and distributors.
SYK introduced the Tornier shoulder arthroplasty portfolio and launched its first new Tornier product, the Perform Humeral Stem, on July 13, 2021. Using Blueprint planning software and the market-leading Perform anatomic and reverse glenoid, the new Tornier Perform Humeral Stem offers clinical solutions for the simplest to most complex shoulder arthroplasty cases. SYK expects now to gain widespread recognition in the shoulder market.
On January 05, SYK acquired OrthoSensor, Inc., a leader in the digital evolution of musculoskeletal care and sensor technology for total joint replacement and other orthopedic procedures. As SYK continues to innovate and advance smart sensor technologies across its joint replacement business, the acquisition of Orthosensor, owing to its advancements in sensor technology, coupled with expanded data analytics and increasing computational power, should l empower surgeons with comprehensive data-driven solutions, and drive improved outcomes and patient satisfaction.
For its fiscal first quarter, ended March 31, 2021, SYK’s net sales increased 10.2% year-over-year to $3.95 billion. The company’s non-GAAP gross profit has been reported at $2.59 billion, which represents a 10.5% year-over-year improvement. Its operating income came in at $928 million, up 7.7% from the prior-year period. SYK’s non-GAAP net earnings have been reported at $737 million, which represents a 5.4% rise from the prior-year period. Its non-GAAP EPS increased 4.9% year-over-year to $1.93. As of March 31, 2021, the company had $2.24 billion in cash and cash equivalents.
Analysts expect SYK’s EPS to improve 7.5% year-over-year for the current quarter, ending September 30, 2021, to $2.30. SYK surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is estimated to be $4.28 billion for the current quarter, which represents a 14.5% year-over-year improvement. SYK’s EPS is expected to grow at a 13% rate per annum over the next five years. The stock has gained 47.1% over the past year and 18.9% over the past nine months. It ended yesterday’s trading session at $261.36.
SYK’s strong fundamentals are reflected in its POWR Ratings. The stock has a B grade for Growth and Stability. We have also graded SYK for Sentiment, Value, Quality, and Momentum. Click here to access all SYK’s ratings.
SYK is ranked #62 in the Medical - Devices & Equipment industry.
Edwards Lifesciences Corporation (EW)
EW provides products and technologies for structural heart disease and critical care, as well as surgical monitoring worldwide. It manufactures heart valve systems and repair products used to replace or repair a patient's diseased or defective heart valve.
EW’s Acumen Hypotension Prediction Index (HPI) software with the Acumen IQ finger cuff received U.S. Food and Drug Administration (FDA) clearance on June 1, 2021. The company expects to witness expanded market reach in the near-term, with the provision of 'smart' monitoring tools to clinicians through this latest predictive technology, which allows for better prediction and management.
On May 18, EW announced the results of a real-world study that compared outcomes for patients with bicuspid aortic stenosis (AS) who were treated with SAPIEN 3 and SAPIEN 3 Ultra Transcatheter Aortic Valve Replacement (TAVR) and at low risk of death from surgery. The data showed excellent outcomes at one year, with low rates of death and stroke, and no significant differences in the primary outcomes compared with the overall cohort. EW expects the study to gain widespread recognition in the industry.
EW’s revenues for its fiscal first quarter, ended March 31, 2021, increased 7.8% year-over-year to $1.22 billion. The company’s gross profit has been reported at $923.20 million, which represents a 6.9% year-over-year improvement. Its non-GAAP operating income came in at $383.50 million, up 4.4% from the prior-year period. EW’s non-GAAP net income has been reported at $340.40 million for the quarter, which represents a 6.2% rise from the prior-year period. Its non-GAAP EPS increased 8% year-over-year to $0.54. The company had $1.17 billion in cash and cash equivalents, as of March 31, 2021.
For the current quarter, ending September 30, 2021, analysts expect EW’s EPS to be $0.55, which represents a 7.8% rise from the prior-year period. EW surpassed the Street’s EPS estimates in three of the trailing four quarters. A $1.30 billion consensus revenue estimate for the current quarter represents a 20.3% year-over-year improvement. The stock’s EPS is expected to grow at a 15.3% rate per annum over the next five years. EW has gained 58.9% over the past year and 23.5% over the past three months. It closed yesterday’s trading session at $106.79.
It’s no surprise that EW has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Growth, Stability, Sentiment, and Quality. Click here to see the additional ratings for EW (Value and Momentum).
EW is ranked #32 in the Medical - Devices & Equipment industry.
Click here to checkout our Healthcare Sector Report for 2021
ISRG shares were trading at $956.31 per share on Thursday afternoon, up $1.23 (+0.13%). Year-to-date, ISRG has gained 16.89%, versus a 16.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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