Buy 5 Medical Instruments Stocks to Enhance Your Portfolio

The Medical Instruments industry has been witnessing a gradual transition from remote healthcare and contactless services during the pandemic to its original space of point-of-care testing, heavy as well as minimally invasive implants, elective procedures, and so on. This industry is highly fragmented, with participants engaged in research and development (R&D) in therapeutic areas.

The Zacks defined Medical Instruments industry has advanced 8.9% in the past year and 9.7% year to date, respectively. Since the Medical Instruments industry ranks within the top 38% of Zacks Ranked industries, we expect it to outperform the market over the next three to six months.

The medical instruments space has been benefiting from the ongoing merger and acquisition trend. The smaller and mid-sized industry players have been trying to compete with the big shots through consolidation. This trend is more visible after the pandemic-led downturn. The big players are also attempting to enter new markets by acquiring niche products.

Moreover, since the beginning of 2023, this industry has been witnessing a massive adoption of artificial intelligence and the Internet of Medical Things in the form of digital healthcare options in hospitals and other healthcare settings. Digital enhancement, amid cost optimization proves to be better for clinical outcomes.

With an increase in the adoption of digital platforms within the medical device space, robotic surgeries, big-data analytics, bioprinting, 3D printing, electronic health records, predictive analytics, real-time alerting and revenue cycle management services are gaining prominence in the United States.

An October 2023 report of Precedence Research suggested that the global digital health market size is anticipated to reach around $939.54 billion by 2032, up from $262.63 billion in 2022, at a CAGR of 13.1%.

However, the Medical Instruments players are suffering from logistical challenges and higher unit costs. The pandemic-led devastation of the global supply-chain management system and the effects of monetary policy tightening by the Fed to combat a record-high inflation rate and the withdrawal of fiscal support amid high debt are negatively impacting the industry.

Our Top Picks

We have narrowed our search to five Medical Instruments stocks with strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank# 2 (Buy).

The chart below shows the price performance of our five picks year to date.

Image Source: Zacks Investment Research

Alcon Inc. ALC is witnessing strength in the Surgical and Vision Care segments backed by healthy markets. Within Surgical, ALC continues to gain market share driven by strong consumables and equipment sales. ALC's flagship lenses, Vivity and PanOptix and monofocal torics continue to lead the category globally.

In Vision Care, ALC is registering solid growth, banking on strong sales of its contact lenses and ocular health products. In contact lenses, ALC is successfully executing its strategy of investing in fast-growing market segments. ALC is witnessing a strong uptake of its specialty daily lenses, including DAILIES Total1 Toric, DAILIES Total1 Multifocal and Precision1 Toric.

Alcon has an expected revenue and earnings growth rate of 6.2% and 11.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days.

RxSight Inc. RXST is a commercial-stage medical device company, engaged in the research and development, manufacture, and sale of light-adjustable intraocular lenses used in cataract surgery in the United States and internationally.

RXST offers the RxSight system that enables doctors to customize and enhance the visual acuity for patients after a cataract surgery. RXST's RxSight system includes RxSight Light Adjustable Lens, a unique photosensitive material that changes shape and power.

RxSight has an expected revenue and earnings growth rate of 51.6% and 73.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 26% over the last 30 days.

Hologic Inc. HOLX continues to witness revenue growth with a recovery in procedural volumes and an acceleration in new business lines. HOLX's GYN Surgical business is registering growth driven by contributions from MyoSure Fluent Fluid Management and Laparoscopy.

HOLX's expanded global installed base of Panthers instruments represents the catalyst for sustained growth in Diagnostics. HOLX's international business continues to drive strong top-line growth. To streamline its operations and reduce the cost of revenues, Hologic has been adopting strategies that are likely to drive future growth.

Hologic has an expected revenue and earnings growth rate of 0.1% and 2.8%, respectively, for the current year (ending September 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the last 30 days.

Veracyte Inc. VCYT continues the strong growth momentum with a robust display of strength in the testing business using its established diagnostic platform. Afirma test's differentiation is leading to market share gains owing to the evidence of its quality and performance. The new GRID ROU tool is garnering strong interest from physicians, while the addition of TERT testing reinforces VCYT's competitive position.

The Decipher Prostrate test is also making strides, achieving a ‘Level 1B' designation in the updated NCCN guidelines and advancing on the reimbursement front. VCYT's strategic R&D investment in long-term growth projects is paying off. Favorable solvency appears encouraging.

Veracyte has an expected revenue and earnings growth rate of 11.9% and 81.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 34.5% over the last 30 days.

Masimo Corp. MASI products have been the subject of various studies over the past few months, which is promising. MASI's focus on patient monitoring and its ongoing research and product development efforts are also impressive. A solid product suite is likely to aid MASI in solidifying its business globally. A strong liquidity position is an added plus.

Masimo has an expected revenue and earnings growth rate of 11.9% and 5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 28.5% over the last 30 days.

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