Like most industries, the market for medical devices suffered a painful blow last year from the effects of the COVID-19 pandemic. However, increased governmental support to strengthen the industry, coupled with mass vaccination rates that have brought COVID-19 under control, has helped the medical devices industry rebound.
Rapid advancements in artificial intelligence (AI) technology, remote monitoring, and connected devices have allowed medical device companies to efficiently respond to a growing demand for crucial equipment. In addition, the increasing prevalence of chronic diseases and growing demand for devices used in elective procedures, such as knee replacement surgeries and cosmetic surgeries, are expected to drive growth for medical devices suppliers. Indeed, the global medical devices market is expected to reach $767.68 billion by 2027, growing at a 6.1% CAGR.
Given this backdrop, we believe medical device makers Hill-Rom Holdings Inc. (HRC) and Integra LifeSciences Holding Corporation (IART) are well-positioned to benefit based on their solid fundamentals and sustained focus on innovation. Both stocks have been rated A by our proprietary POWR Ratings system.
Click here to checkout our Healthcare Sector Report for 2021
Hill-Rom Holdings Inc. (HRC)
HRC is a Batesville, Ind.-based global medical technology company. The company operates mainly through three segments: Patient Support Systems, Front Line Care, and Surgical Solutions. It offers a wide range of products and services, including medical-surgical beds, critical care unit beds, patient mobility solutions, information technology, and software solutions.
This month, HRC unveiled its Helion Integrated Surgical System in the United States. The System gives operating room teams the connection, flexibility, and efficient staff communication they need to improve patient outcomes. Through this launch, the company has exhibited its commitment to advancing its connected care capabilities.
HRC’s net revenue increased 5.4% year-over-year to $762 million in the second quarter, ended March 31, 2021. Its operating profit grew 31% from its year-ago value to $114.3 million. Its net income increased 85.7% year-over-year to $87.1 million. In addition, its EPS increased 85.7% year-over-year to $1.3 over this period.
The company’s EPS is expected to grow 9.6% year-over-year to $6.06 in its fiscal year 2021. Analysts expect HRC’s revenue to increase 2% year-over-year to $2.94 billion in the current year. The stock has gained 9.7% over the past month and 26.3% year-to-date.
HRC's POWR Ratings reflect this promising outlook. The company has an A overall rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HRC also has an A grade for Value, and a B for Stability and Sentiment. Within the Medical – Devices & Equipment industry, it is ranked #11 of 188 stocks.
To see additional POWR Ratings for Growth, Quality, and Momentum for HRC, click here.
Integra LifeSciences Holding Corporation (IART)
IART creates, produces, and distributes surgical implants and medical equipment for neurosurgery, orthopedics, and general surgery. Codman Specialty Surgical & Orthopedics and Tissue Technologies are the two segments through which the company operates. IART is based in Plainsboro, N.J.
This month, Vizient, Inc. awarded IART an Innovative Technology contract for its SurgiMend Collagen Matrix for soft tissue reconstruction. The award might allow the company to establish a stronger brand image and further boost its growth prospects.
During the second quarter, ended June 30, 2021, IART’s net revenue increased 50.8% year-over-year to $389.99 billion. Its operating income grew 268.3% from its year-ago value to $51.85 million. The company reported $35.07 million in net income, versus a $369,000 net loss in the prior-year quarter. Its adjusted EBITDA increased 91.1% year-over-year to $101 million over this period.
The company's EPS is expected to grow 19.2% year-over-year to $2.92 in the current year. Analysts expect IART's revenue to increase 11.8% from its year-ago value to $1.53 billion in its fiscal year 2021. IART's stock has gained 46.7% over the past year. Also, the stock has surged 9.7% year-to-date.
IART's strong fundamentals are reflected in the POWR Ratings. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system. IART is also rated A grade for Growth, and B for Value and Stability. Within the Medical – Devices & Equipment industry, it is ranked #16 of 188 stocks.
Click here to see additional POWR Ratings for Momentum, Quality, and Sentiment for IART.
Click here to checkout our Healthcare Sector Report for 2021
HRC shares were trading at $136.93 per share on Wednesday morning, up $13.15 (+10.62%). Year-to-date, HRC has gained 40.38%, versus a 18.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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