Medical device makers are outperforming the general healthcare market so far this year as supply issues ease and the volume of medical procedures is increasing.
Three examples are Medtronic (MDT -1.37%), Edwards Lifesciences (EW -0.42%), and Stryker (SYK -0.15%), each of which is up more than 15% this year. The rest of the healthcare industry, on the other hand, has mostly seen its shares decline. The Health Care Select Sector SPDR ETF and the iShares U.S. Healthcare ETF are down more than 3% and 6%, respectively.
Let's see what the prospects are for these medical device stocks to continue outperforming this year.
Medtronic on the upswing
Medtronic is a medical equipment giant with more than 90,000 employees across 150 countries. It makes products that address 70 medical conditions -- everything from heart pumps to robotic-assisted surgery systems, to surgical tools and insulin pumps.
Revenue through the first nine months of fiscal 2023 was down 3.4%, year over year, and net income was off by 37.8%, but recent catalysts have boosted the company's stock, which is up more than 15% this year.
The company just got approval for its MiniMed 780G diabetes pump with a Guardian 4 sensor from the Food and Drug Administration (FDA). The system was approved in Europe in 2020, but its approval in the U.S. was delayed by quality control problems. It's the only infusion set pump that can be worn up to a week.
The company has also piqued investors' interest with its artificial intelligence-driven collaboration with Cosmos Pharmaceuticals and Nvidia. The idea is to incorporate Nvidia's AI technologies into Medtronic's GI Genius intelligent endoscopy module to help early detections by physicians of the polyps that can lead to colon cancer.
As a bonus, Medtronic has raised its quarterly dividend for 45 consecutive years, including an 8% bump this year to $0.68 per share, representing a yield of roughly 3%.
Edwards gets to the heart of the matter
Edwards, which has more than 17,000 employees and focuses on medical equipment related to structural heart disease in addition to surgical and critical care monitoring. The company's stock is up more than 17% this year.
The company has improved annual revenue for more than a decade, showing strong resilience during the height of the COVID-19 pandemic. The company released first-quarter earnings on April 26. Revenue was $1.46 billion, up 9% year over year, though earnings per share (EPS) slipped to $0.56, down from $0.59 in the prior year.
Edwards is a leader in transcatheter aortic valve replacements (TAVR) and had TAVR sales of $948 million, up 8%. The company is just beginning to see the impact of its newest TAVR launch, the Sapien 3 Ultra Resilia, and said it expects it to be responsible for the majority of Edwards' TAVR sales this year. Its other three segments, transcatheter mitral and tricuspid therapies (TMTT), structural heart disease, and critical care monitoring, saw revenue gains of 53.6%, 12.4%, and 4.6%, respectively.
The company upgraded its yearly guidance thanks to improved sales in each of its segments. It said it expects yearly revenue between $5.6 billion to $6 billion, compared to $5.4 billion in 2022, and adjusted EPS from $2.48 to $2.60, compared to $2.48 in 2022.
Stryker is seeing big gains
Medical equipment maker Stryker employs roughly 43,000 people and has 4,045 patents. The company makes everything from hospital beds to image-guided surgical devices. Its shares are up more than 22% this year thanks to improved financials.
Stryker reported $18.4 billion in 2022 revenue, up 7.8%, and EPS of $6.17, up 18.4%. The company's guidance points to organic sales growth of 7% to 8.5% in 2023, down from the 9.7% gain in 2022, and adjusted EPS between $9.85 to $10.15 compared to adjusted EPS of $9.34 in 2022.
The company has been increasing its robotic-assisted surgery offerings. It launched the Mako Total Knee 2.0 in March, one of its next-generation Mako SmartRobotics products, and said it plans to launch Mako Spine in the second half of 2024 and Mako Shoulder by the end of 2024. The company has Mako systems in 35 countries, and more than one million procedures have been done with Mako systems. Sales of its systems helped push the company's orthopedics and spine segment to $7.8 billion in sales, up 3.4%
The company's other segment, medical-surgical nursing and neurotechnology, saw larger growth of 11.2% to $10.6 billion.
The company has also increased its digital presence with its $3.09 billion purchase early last year of Vocera Communications. Vocera's healthcare-related products include secure text messaging, alarms and notifications, patient experience and analytics tools, all designed to perform better communications in a hospital.
Stryker has increased its quarterly dividend for 29 consecutive years, including a 7.9% raise this year to $0.75 per share, equaling a yield of 0.97%.
