2 Recently Upgraded Medical Device Stocks to Consider Adding to Your Portfolio
The global medical devices market is growing quickly, aided by substantial investment in technological advancement and the development of smart solutions. And the growing prevalence of chronic diseases and an...
The global medical devices market is growing quickly, aided by substantial investment in technological advancement and the development of smart solutions. And the growing prevalence of chronic diseases and an aging population are driving market demand. Recently, medical devices stocks Edwards (EW) and Integra (IART) were upgraded, and we think these stocks could be ideal bets now. So, let’s discuss.
The global medical devices market was adversely impacted last year during the COVID-19 pandemic. However, the growing prevalence of chronic diseases and the emphasis on early diagnosis and treatment are driving the demand for medical devices back to pre-pandemic levels. Studies show that more than half of all U.S adults have at least one chronic disease, and the number is rising. An aging population, among other factors, is also driving the market.
In addition, the integration of advanced technologies like artificial intelligence (AI), 3D printing, and the development of other smart gadgets are positioning the industry for long-term growth. The global medical devices market is projected to grow at a 5.4% CAGR to $657.98 billion in 2028. And several companies are focusing on R&D to develop advanced devices to capitalize on the growing market.
Given this backdrop, we think recently upgraded medical devices stocks, Edwards Lifesciences Corporation (EW) and Integra LifeSciences Holdings Corporation (IART), could be solid additions to one’s portfolio now. Last week, JPMorgan analyst Robbie Marcus upgraded EW from Neutral to Overweight with a price target of $140.00. And research analysts at JPMorgan Chase & Co. upgraded IART from an underweight rating to a neutral rating.
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 December 20, EW announced the U.S. Food and Drug Administration’s (FDA) approval to use its SAPIEN 3 transcatheter valve with the Alterra adaptive prestent (SAPIEN 3 with Alterra) for patients with severe pulmonary regurgitation. This new treatment option is a significant breakthrough, potentially reducing the number of surgeries and procedures required by some heart patients.
EW's net sales increased 14.8% year-over-year to $1.31 billion in its fiscal third quarter ended September 30. Its operating income stood at $390.30 million, up 9.1% from the same period last year. Its adjusted net income grew 5.9% from its year-ago value to $343 million. And the company's EPS increased 5.9% year-over-year to $0.54.
A $1.36 billion consensus revenue estimate for the fiscal fourth quarter, ending December 2021, indicates a 13.9% improvement from the same period last year. Analysts expect the company's EPS to come in at $0.55 in the current quarter, reflecting a 10% rise year-over-year. Furthermore, EW surpassed the Street's EPS estimates in three of the trailing four quarters.
EW has gained 33.9% year-to-date. Over the past year, the stock has gained 41.2% in price to close yesterday's trading session at $120.03.
EW's strong fundamentals are reflected in its POWR Ratings. EW has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
EW has a B grade for Stability and Quality. Among the 166 stocks in the Medical - Devices & Equipment industry, EW is ranked #35.
Beyond what we have stated above, we have also rated EW for Growth, Value, Momentum, and Sentiment. Click here to view all EW ratings.
Integra LifeSciences Holdings Corporation (IART)
IART in Plainsboro, N.J. develops, manufactures, and markets surgical implants and medical instruments for neurosurgery, extremity reconstruction, orthopedics, and general surgery. It operates in two segments: Codman Specialty Surgical and Orthopedics and Tissue Technologies.
In the third quarter, the company launched its next-generation intracranial pressure monitor in both the U.S. and Europe. It also launched Aurora Surgiscope, a novel and proprietary minimally invasive surgical solution with integrated visualization and capabilities designed specifically for use in neurosurgery in a phased, limited clinical manner, and expects a broader commercial launch in the second half of 2022. In addition, IART plans to launch its new peripheral nerve repair product, NeuraGen® 3D, in early 2022. With these potential product launches, the company is expected to garner significant returns over the coming year.
IART appointed Jan D. De Witte as its next President and Chief Executive Officer in October. De Witte is expected to join IART before the end of the year. With his extensive experience at internationally recognized companies and diverse expertise in R&D, commercialization, product management, digital innovation, and operations, De Witte should be a valuable addition to the company's board.
IART's total revenues increased 4.5% year-over-year to $386.86 million in its fiscal third quarter, ended on September 30, while its total organic revenues increased 6.7% year-over-year to $366.62 million. Its adjusted net income came in at $73.06 million, up 7.9% from the same period last year. The company's adjusted earnings per share increased 7.5% year-over-year to $0.86.
Analysts expect IART's revenues to increase 12.3% year-over-year to $1.54 billion in the current year. The $3.15 consensus EPS estimate for the current year indicates a 28.6% rise from the prior year. The company has an impressive earnings surprise history; it has beaten the consensus EPS estimates in each of the trailing four quarters.
Shares of IART have gained 5.8% in price over the past year and 1.6% over the past five days to close yesterday's trading session at $64.28.
It is no surprise that IART has an overall grade of B, which equates to a Buy in our proprietary POWR Ratings system. IART also has a grade of B for Value and Stability. It is ranked #32 in the Medical - Devices & Equipment industry.
Click here to view additional IART ratings for Growth, Quality, Sentiment, and Momentum.
EW shares were unchanged in premarket trading Tuesday. Year-to-date, EW has gained 31.57%, versus a 22.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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