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4 MedTechs to Gain in 2H21 Beating the Delta Variant-Led Dip

Investors can choose to invest in MedTech stocks like VREX, OMCL, STAA, and IDXX that have shown tremendous promise amid the pandemic.

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This story originally appeared on Zacks

The first half of 2021 was exceptionally good for MedTech with the majority of the players reaching their pre-COVID business performance. The vision for the second half was originally brighter on improving economy and market trends. However, currently, the industry is again grappling with anxiety due to the spread of the highly-transmissible Delta variant of COVID-19.

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Despite the ongoing mass vaccination drive, market forecasters are unsure about whether the Delta variant-led economic downturn is momentary or will it be more severe in the future.

Contrasting Views

On the one hand, a few of them think that the U.S, economy this time will not be stumbling like the previous year as it is much well prepared now to tackle the pandemic, thanks to the vaccination drive. This apart, a series of fiscal stimulus measures is going to help overcome economic stagnation. Further, it took almost one-and-a-half years for the market to recognize the alternative growth components needed for overall development of the economy even when it seemingly reaches a dead end. In the second half, despite the severe repercussions of the Delta strain, the economy is expected to effectively operate on this past experience, thus preventing an extreme meltdown.

On the other hand, many market influencers are unable to retain a bright vision for the rest of 2021 as this new variant has already started to dampen overall consumer demand and increased cost of production. Despite promising job market data for July, with the unemployment rate dropping more than 5%, the August data is widely expected to demonstrate a slowdown in job market recovery on a significant surge in COVID cases through the month. Going by a Bloomberg article of Aug 29, the United States has probably added 750,000 jobs in August, a slowdown from June and July. In this regard, Fed Chair Jerome Powell’s statement last week that the Delta variant presents a near-term risk for full employment increases concern.

What’s in Store for MedTech in 2H21?

Just like the broader economy, the dynamic nature of COVID-19 has transformed the MedTech landscape like never before. While swift vaccine rollouts are ongoing, industry watchers are still unable to gauge the magnitude of economic revival in 2021 due to the emergence of the more contagious strains in several parts of the world including the United States.

The economic trend revival was pretty evident from the MedTech sector’s business turnovers through the first half of 2021. Despite the emergence of the new virus strains, MedTech companies’ collective business growth showed strong signs of recovery in non-COVID legacy base sales volumes.

While the industry forecasters were earlier certain about strong second-half prospects, the emergence of the Delta strain has cast a doubt upon consistent recovery across all non-elective sectors in terms of procedure volume. With growing uncertainty around the pandemic and the new and extended COVID restrictions in several developed and emerging markets, the market participants (especially sector players in cardiac and vascular, neuromodulation, minimally invasive and non-invasive surgeries, dental, ENT as well as orthopaedic) are currently seeing some COVID-related strong headwinds. Further, uncertainty related to the efficacy of the vaccination against the Delta variantis increasing apprehension among the investors. Going by an Aug 27 CDC report, vaccine effectiveness has declined from 91% to 66% among the front-line workers since the SARS-CoV-2 Delta variant became predominant in the United States.

At the same time, demand for COVID-19 testing, hospital admissions and COVID-associated hospital equipment, which significantly dropped through the first half of 2021, due to a decline in new cases, is once again on the rise.

4 MedTech Stocks to Gain in the Current Scenario

Going by the aforementioned discussion, investors can choose to invest in stocks that have shown tremendous promise amid this health crisis and challenging market conditions, and have growth potential.

To narrow down the list, we have selected four stocks with a Growth Score of A or B. Our research shows that stocks with a Growth Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

One-Year Price Performance

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Image Source: Zacks Investment Research

 

Our first pick is Varex Imaging Corporation VREX, a designer and manufacturer of X-ray imaging components. The company is currently registering strong demand in both medical and industrial segments. Higher sales volume and continued execution on expense management are leading to margin improvement and profitability expansion. This Zacks Rank #1 company is currently expected to register strong demand for its CT tubes globally through 2021.

The company has a Growth Score of A. Varex Imaging’s fiscal 2021 (ending Sep 2021) earnings and sales are expected to grow 1425% and 9.3%, respectively from the previous year.

Our next pick is Omnicell, Inc. OMCL, a developer and marketer of end-to-end automation solutions for the medication-use process. Through the pandemic, the company has registered continued strong momentum in commercial business and strong customer implementations. The company recently announced its intent to acquire FDS Amplicare in an effort to strengthen its Advanced Services portfolio.

This Zacks Rank #2 stock has a Growth Score of A. Omnicell’s 2021 earnings and sales are expected to grow 45.3% and 24.6%,respectively from the previous year.

The next stock on the list is STAAR Surgical Company STAA, a designer, developer, manufacturer and marketer of implantable lenses for the eye with companion delivery systems. The company is currently witnessing accelerated sales momentum and benefiting from significant opportunities invision correction lenses. Following the company’s record breaking first-half 2021 results and with increased visibility into key second-half growth drivers for its business, STAAR Surgical recently raised its outlook for  2021.

This Zacks Rank #2 stock has a Growth Score of A. The company’s 2021 earnings and sales are expected to grow 100% and 37.7%, respectively from the previous year.

Last but not the least is IDEXX Laboratories, Inc. IDXX, a developer, manufacturer and distributorof products and services primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets. The company is witnessing sturdy gains in CAG Diagnostics’ recurring revenues, supported by sustained strong global trends in pet healthcare.

This Zacks Rank #2 stock has a Growth Score of B. The company’s 2021 earnings and sales are expected to grow by 24.4% and 17.9%,respectively from the previous year.



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