3 MedTech Growth Stocks to Scoop Up Ahead of Q3 Earnings
Going by the GDP Growth calendar of Trading Economics, the real GDP of the third quarter 2020 is expected to reflect a decline of 31.4% at an annualized rate (actual data to be released on Oct 29). This is a 30-basis points improvement from the second quarter GDP loss of 31.7% on an annualized basis that marked it as the worst-ever quarterly plunge in history). The third-quarter earnings season is expected to bring in marginally better news for investors on resumption of economic activities and easing of lockdowns. Despite a sharp uptick in new coronavirus cases, the economy is rebounding on ramped up corporate activities.
The U.S. MedTech sector had presented a mixed second quarter performance. On one hand, we observed postponement of various elective procedures which severely impacted companies’ non-diversified nature of business. One such notable example is renowned cardiovascular player Edwards Lifesciences Corporation EW, which reported dismal second-quarter net sales due to deferral of non-emergency procedures. Over the past six months, this stock has risen 12.1% compared with the industry’s 26.8% rise.
However, companies like QIAGEN N.V. QGEN, a key molecular diagnostics solutions provider, came up with a robust second-quarter show primarily on significant demand for testing solutions used in the COVID-19 pandemic. Its segmental as well as geographic revenues were boosted by higher testing demand. Over the past three months, this stock has risen 9.2% against the industry’s 8.3% fall.
In the third quarter, the overall situation might have gotten significantly better in MedTech as along with COVID-19-bound growing demand for diagnostic and therapeutic products, majority of the hospitals reintroduced elective procedures and many physician offices got reopened through the quarter. In fact, we expect the companies to have met huge pent up demand for their earlier-postponed products.
Best MedTech Growth Stocks Now
The overall dismal performance by MedTech stalwarts through the pandemic sent investors into a frenzy, leading to widespread panic-selling. However, there are a few companies which put up solid performances despite the challenging business scenario.
Ahead of their Q3 earnings release, we discuss some MedTech stocks which might do pretty well this time around due to the nature of their business. Despite being hurt by the pandemic-led disruptions, these companies could sustain amid the market meltdown and provide attractive returns to investors. Some of these companies performed impressively during the second quarter and are expected to have continued their run in the third quarter as well. We also talk about some companies whose performances were actually boosted by the pandemic and boast strong fundamentals. This has made them the best investment options before the release of their quarterly results amid the market mayhem.
3 Stocks to Buy
Here we have handpicked three stocks from the MedTech space which have held their ground during the pandemic-led market meltdown, primarily due to the nature of their business. These stocks are expected to have continued with their robust performance during the third quarter as well. These stocks, with strong growth potential, are extremely attractive picks now.
To narrow down the list, we have selected 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.
The first company that investors can consider is animal health player, IDEXX Laboratories, Inc. IDXX, which is slated to release third-quarter results on Oct 29. The Zacks Rank 2 company, with a Growth Score of A, has been showing strong growth within its Companion Animal Group business. Sturdy gains in Diagnostics recurring revenues are also encouraging. Further, regulatory clearances of OPTI SARS-CoV-2 RNA RT-PCR buoy optimism.
Its return on equity (ROE) stands at an impressive rate of 241.5% against the industry’s negative return. Further, its projected earnings per share (EPS) growth rate currently stands at 16.9% versus the industry’s 1.1%. The company projects 13.7% earnings growth for the third quarter. Over the past six months, this stock has risen 59.4% compared with the industry’s 26.8% rise.
Our next pick is LHC Group, Inc. LHCG, a company that serves as a post-acute care partner for hospitals, physicians and families in the United States. The Zacks Rank #2 company has a Growth Score of A and is slated to release third-quarter results on Nov 4. The company continues to gain from hospice admissions. Its recent finalization of a joint venture (JV) partnership with Orlando Health is encouraging. LHC Group is focused on acquisitions and JVs for inorganic expansion. Its pipeline of potential M&A growth opportunities also remains robust and well balanced between Home Health and Hospice.
Its ROE of 9.1% compares favorably with the industry’s negative return. Further, its projected EPS growth currently stands at 6.4% versus the industry’s 2.3%. The company projects 4.8% earnings growth for the third quarter. Over the past six months, this stock has risen 71.2% compared with the industry’s 47.4% rise.
Our final pick is renowned designer, manufacturer and distributor of medical devices and cloud-based software solutions to manage respiratory disorders, ResMed Inc. RMD. This Zacks Rank #2 company, with a Growth Score of A, will be releasing first-quarter fiscal 2021 results on Oct 29. Over the past few months, ResMed has been gaining from the reopening of sleep labs and physician practices across many geographies and robust adoption of digital health solutions. Strength in ventilator and mask sales amid the pandemic buoys optimism. Recent product launches instill investors’ confidence in the stock.
Its ROE of 30.3% compares favorably with the industry’s negative return. Further, its historical EPS growth currently stands at 13.1% versus the industry’s 10.7%. The company projects 2.2% earnings growth for the first quarter of fiscal 2021. Over the past six months, this stock has risen 8.7% compared with the industry’s 4.9% rise.
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Edwards Lifesciences Corporation (EW): Free Stock Analysis Report
ResMed Inc. (RMD): Free Stock Analysis Report
QIAGEN N.V. (QGEN): Free Stock Analysis Report
LHC Group, Inc. (LHCG): Free Stock Analysis Report
IDEXX Laboratories, Inc. (IDXX): 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 Nasdaq, Inc.