3 Top-Ranked Medical Equipment Stocks to Buy Now - Analyst Blog

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The fiscal 2015 budget for the Department of Health and Human Services (HHS) has apparently brought a fresh lease on life to the U.S. healthcare economy. Aiming at more effective implementation of the Patient Protection and Affordable Care Act (ACA), this budget has worked on increasing healthcare spending in the country. The healthcare spending is projected to grow at 5.8% during 2012-2022.

The budget promises $14.6 billion of strategic investment divided into three key areas: $4 billion in expanded funding for the National Health Service Corps (in addition to $100 million in discretionary funding and $310 million in current law funding for 2015), $5.2 billion for a new Targeted Support for Graduate Medical Education program and $5.4 billion for enhanced Medicaid reimbursements for primary care.

A new private health insurance market has been created with a number of new protections. Millions of Americans are now enjoying this new health insurance option. ACA, while providing full funding to cover newly eligible adults, has a target to expand Medicaid up to 133% of the federal poverty level for three years starting 2014. It has also simplified Medicaid and Children's Health Insurance Program's (CHIP) eligibility and enrollment processes, facilitating coverage of a lot more low-income people.

We are encouraged to note that the fiscal 2015 budget includes $30.4 billion for the National Institute of Health (NIH) - an increase of $211 million over 2014. This reflects the government's focus on investment in advanced medical research which has remained undeterred in its drive to stimulate economic growth. The Food and Drug Administration (FDA), the Centers for Disease Control and Prevention (CDC) and Centers for Medicare and Medicaid Services (CMS) are the other big gainers from this budget.

However, industry-wide prospects in healthcare for 2015 still remain a matter of legitimate debate. Despite the expected improvement in economic conditions by 2015, the expansion of the ACA coverage and an aging population, to our surprise, in totality, the HHS budget promises $1 trillion in outlays and $77.1 billion in discretionary budget authority for fiscal 2015 - a reduction of $1.3 billion from the current fiscal year.

To weather the squall of sequestration and the Medical Device Excise Tax, companies are coming up with efficient capital allocation and business model innovations. Moreover, of late, it has become common practice of medical device companies to dodge the steep U.S. corporate tax rate by shifting their tax base overseas. One such example in recent times is Medtronic Inc.'s ( MDT ) impending acquisition of its Irish rival Covidien plc ( COV ).

3 Healthcare Equipment Stocks that Look Promising

Bacterin International Holdings, Inc. ( BONE ) develops, manufactures and markets biologics products in the U.S. and international markets.

The company recorded healthy sales growth in the second quarter of 2014, representing the third straight quarter of top-line growth. According to the company, recent upper management churn along with the successful transition of its U.S. business to recurring revenues from end-user hospitals, completed in the reported quarter, is expected to prove beneficial.

Long-term expected earnings growth rate for this Zacks Rank #2 (Buy) stock is an impressive 20%, ahead of the industry growth rate of 17.9%. The Zacks Consensus Estimate for the current year has moved up 68% over the last 30 days.

Inogen, Inc. ( INGN ) is a medical technology company that offers advanced respiratory products for use in the homecare setting for patients suffering from chronic respiratory conditions. The company is demonstrating solid growth on the back of factors like focus on leveraging from investments in its go-to-market capacity, portfolio innovations and the FDA clearance for the stationary oxygen-concentrated product.

Long-term expected earnings growth rate for this Zacks Rank #2 stock is 22% compared to the industry growth rate of 17.9%. The Zacks Consensus Estimate for the current year has revised 17.9% upward over the last 30 days.

Echo Therapeutics, Inc. ( ECTE ) is the developer of Symphony CGM System, a non-invasive, wireless continuous glucose monitoring system for use initially in the critical care setting.

Long-term expected earnings growth rate of 40% for this Zacks Rank #2 stock compares favorably with the industry growth rate of 17.9%. In addition, The Zacks Consensus Estimate for the current year has seen an upward revision of 6.9% over the last 30 days.

Is the Growth Trend Stabilizing?

Amid an overall bleak scenario, the three medical device behemoths - Medtronic, Boston Scientific Corp. ( BSX ) and St. Jude Medical, Inc. ( STJ ) - are striving hard to gain share in the implantable cardioverter-defibrillator (ICD) market on the back of new product launches. With a gradual stability in the ICD market, these players should eventually be able to revive their top line results.

Besides, the number of retiring baby boomers are expected to nearly double by the year 2030. We believe the orthopedic giant like Stryker Corp. ( SYK ) and Zimmer Holdings ( ZMH ) stand to benefit from this aging demographic. Further, with gradually improving volume, pricing environment and esoteric testing business growing at a faster pace, we are upbeat about Quest Diagnostics Inc. ( DGX ) and Laboratory Corp. of America Holdings ( LH ).


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BOSTON SCIENTIF (BSX): Free Stock Analysis Report

MEDTRONIC (MDT): Free Stock Analysis Report

QUEST DIAGNOSTC (DGX): Free Stock Analysis Report

STRYKER CORP (SYK): Free Stock Analysis Report

ZIMMER HOLDINGS (ZMH): Free Stock Analysis Report

COVIDIEN PLC (COV): Free Stock Analysis Report

ST JUDE MEDICAL (STJ): Free Stock Analysis Report

LABORATORY CP (LH): Free Stock Analysis Report

ECHO THERAPEUT (ECTE): Free Stock Analysis Report

BACTERIN INTL (BONE): Free Stock Analysis Report

INOGEN INC (INGN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: HHS , CDC , CMS , ICD , BSX

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