SYK - The 3 Best MedTech Stocks to Buy Now: May 2024

2024-05-29 14:30:56 ET

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In a recent deep-dive research report on the state of the MedTech (medical technology) sector, Oppenheimer highlighted the potential of artificial intelligence ( AI ) in the sector, noting its capacity to save an estimated $200 billion to $300 billion annually through enhanced workflow management. Inspired by these findings, this article explores the three best MedTech stocks to buy now, each poised to capitalize on AI-driven advancements.

The promise of AI in MedTech is substantial with workflow efficiency improvements ranging from 50% to 100%. AI has also improved breast cancer detection rates by 20% and is becoming routine in continuous glucose monitoring ( CGM ) and ambulatory electrocardiogram ( ECG ) monitoring, with high accuracy rates.

Let’s now take a look at three of the best MedTech stocks to buy that are leading the way in leveraging these AI advancements.

Medtronic (MDT)

Medtronic (NYSE: MDT ) is a global leader in medical technology, services and solutions. The company develops and manufactures a wide range of medical devices that address various health conditions, including pacemakers, insulin pumps, spinal implants and surgical tools.

Last week, Medtronic reported its fiscal fourth-quarter earnings, revealing a slight increase in revenue but a notable shortfall in its cardiovascular division. The company’s adjusted earnings per share ( EPS ) were $1.46, a decrease from $1.57 year-over-year ( YOY ). Overall revenue edged up to $8.59 billion, marking a 0.5% rise from the previous year.

Despite the overall revenue growth, cardiovascular revenue fell by 5.6% YOY to $3.13 billion, missing the projected $3.17 billion. Conversely, medical surgical revenue slightly exceeded expectations at $2.20 billion, compared to the anticipated $2.15 billion, even though it represented a 1.2% YOY decline.

Neuroscience and diabetes divisions performed well, with revenues of $2.55 billion and $660 million respectively. These figures not only showed growth of 5.6% and 11% YOY but also surpassed analyst estimates.

The company’s profitability metrics showed mixed results, with adjusted gross margin narrowly declining to 65.8% from 65.9% YOY, albeit beating the estimate of 65.5%. However, the adjusted operating margin saw a more significant drop to 26.9% from the previous year’s 29.4%, falling short of the 27.3% market estimate.

Looking forward, Medtronic provided guidance for fiscal year 2025, expecting diluted non-GAAP EPS to be in the range of $5.40 to $5.50. As a stable performer with strategic advancements in medical technology, Medtronic remains one of the best MedTech stocks to consider for long-term investment.

Dexcom (DXCM)

Dexcom (NASDAQ: DXCM ) is a prominent medical device company specializing in continuous glucose monitoring ( CGM ) systems for people with diabetes. Their primary product line, the Dexcom G6 and the newer G7 CGM systems, provide real-time glucose readings, trends and alerts to help patients manage their diabetes more effectively.

Shares of DexCom hit a three-year high recently following a federal court ruling that determined DexCom did not infringe on two patents owned by a subsidiary of Abbott Laboratories (NYSE: ABT ).

The decision was a mixed verdict, finding that DexCom had infringed on only one of the four patents in question, with no verdict reached regarding the fourth patent. Notably, the jurors did not address potential damages in their verdict.

Following this decision, Citi analysts maintained a buy rating on DexCom, with the analyst considering the ruling to be favorable for the company, particularly concerning its G6 continuous glucose monitoring system ( CGMS ). The analyst also suggested that similar outcomes might be expected for other products in DexCom’s G-series.

In addition to the legal victory, DexCom reported strong financial results for the fourth quarter. The company’s revenue exceeded the average analyst estimate, coming in at $1.03 billion, marking a 27% increase year-over-year. These successes underscore why DexCom is consistently ranked among the best MedTech stocks to buy, reflecting its leadership and innovation in the healthcare sector.

Stryker (SYK)

Stryker (NYSE: SYK ) is a leading MedTech company that provides a wide array of products and services in orthopedics, medical and surgical equipment and neurotechnology and spine. Their orthopedic products include joint replacement implants, trauma systems and surgical navigation systems.

Stryker shares surged to record highs a few weeks ago after the company released the fourth-quarter results and full-year guidance, which surpassed analysts’ expectations. Needham & Co. responded to Stryker’s performance by upgrading the stock to a Buy rating from Hold. Alongside the rating change, the firm set a new price target for Stryker at $392 , suggesting a potential 19% increase from the stock’s last closing price.

The company reported a 9.7% increase in net sales, reaching $5.2 billion. This growth was further highlighted by a 10% increase in organic net sales. Stryker’s reported operating income margin stood at 18.5%, while its adjusted operating income margin saw a significant boost of 80 basis points, climbing to 21.9%.

On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

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