With an aging population and a rise in chronic health issues, medical technology innovations are rapidly becoming essential in healthcare, enabling quicker diagnoses and improved patient outcomes. The medical device industry is experiencing dynamic growth fueled by advancements in technology and increasing demand for innovative healthcare solutions.

Given this landscape, investors might consider investing in three fundamentally strong medical devices stocks, Stryker Corporation (SYK), Axogen, Inc. (AXGN), and Zimmer Biomet Holdings, Inc. (ZBH), that are well-positioned for potential growth.

Medical device companies specializing in surgical robotics, imaging, diagnostics, and portable health monitoring devices are delivering innovative products that meet the rising demand for efficient and less invasive treatments. The key market driver in this sector is the aging population, rising awareness and accessibility, and a surge in technological advancements.

As per the World Health Organization (WHO), the global population aged 60 and above will double to 2.1 billion by 2050. This demographic shift means the role of medical devices will be more crucial than at other times in history.

Healthcare providers and patients alike are prioritizing convenience and precision, pushing for technologies that aid in real-time monitoring and minimally invasive procedures. The United States is the largest medical device market in the world, compromising over 40% of the global MedTech market, providing physicians and other healthcare providers with the best tools to diagnose and treat patients.

According to a KPMG report, the medical device industry is poised for steady growth, with global annual sales forecasted to reach nearly $800 billion by 2030, with a rise of over 5% a year. Companies in this space benefit from long-term demand as healthcare spending remains resilient.

Now, let’s take a closer look at the fundamentals of the Medical - Devices & Equipment stocks mentioned above, beginning with the third choice.

Stock #3: Stryker Corporation (SYK)

Stryker Corporation operates as a medical technology company. The company operates through two segments: MedSurg and Neurotechnology, and Orthopaedics and Spine. 

On October 1, SYK announced the completion of the acquisition of its Vertos Medical Inc., a leader in interventional pain management solutions for chronic lower back pain caused by lumbar spinal stenosis. This acquisition enhances non-surgical solutions with minimal invasive wild procedures for SYK.   

On September 17, SYK announced that it completed its acquisition of care.ai, a privately held company specializing in delivering AI-assisted virtual care workflows, smart room technology, and ambient intelligence solutions. This acquisition should strengthen Stryker’s growing healthcare IT offering and wirelessly connected medical device portfolio.

In the fiscal third quarter that ended on September 30, 2024, SYK’s net sales increased 11.9% year-over-year to $5.49 billion. The company reported an operating income of $2.43 billion, indicating a 9.2% growth from the prior-year quarter.

SYK’s adjusted net earnings came in at $1.11 billion, up 17.3% year-over-year, while its adjusted earnings per share grew 16.7% from the year-ago value to $2.87.

For the full year 2024, SYK expects organic net sales to be in the range of 9.5% to 10% and adjusted net earnings diluted per share to range from $12 to $12.10.

The consensus revenue estimate of $6.36 billion for the fiscal first quarter (ending December 2024) represents a 9.4% increase year-over-year. The consensus EPS estimate of $3.87 for the same quarter indicates an 11.9% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

Moreover, SYK’s revenue has grown at CAGRs of 9.7% and 8.6% over the past three and five years, respectively. In addition, its EBIT increased at 8.4% CAGR over the past three years.

Over the past year, the stock has surged 33.3%, closing the last trading session at $369.02.

SYK’s stance is apparent in its POWR Ratings. The stock has a B grade for Growth, Stability, and Sentiment. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Among the 138 stocks in the Medical - Devices & Equipment industry, it is ranked #46. Click here to see the additional SYK ratings (Value, Momentum, and Quality).

Stock #2: Axogen, Inc. (AXGN)

AXGN develops and commercializes technologies for peripheral nerve regeneration and repair worldwide. The company offers repair solutions for surgeons and healthcare providers. Its products include Avance nerve graft, Axoguard Nerve Connector, Axoguard Nerve Protector, Axoguard Nerve Cap, Axotouch Two-Point Discriminator, and Axoguard HA+ Nerve Protector.

On June 24, AXGN launched Avive+ Soft Tissue Matrix™, which is used for a soft tissue barrier and is a resorbable, multi-layer amniotic membrane allograft that provides temporary protection and tissue separation during the critical phase of peripheral nerve healing. This launch is a new opportunity to improve patient outcomes after acute traumatic injury.

During the third quarter that ended on September 30, 2024, AXGN’s revenue increased 17.9% year-over-year to $48.64 million. The company’s gross profit amounted to $36.44 million, reflecting an increase of 14.9% from the prior-year quarter.

Its adjusted EBITDA of $6.49 million, indicating a 175.6% growth from the prior-year quarter. In addition, AXGN’s adjusted net income amounted to $3.15 million and $0.07 per share, reflecting considerable increases year-over-year.

Looking ahead, AXGN anticipates annual revenue for fiscal year 2024 to fall between $182 million and $186 million. The company also projects gross margin to be in the range of 74% to 76%.

Analysts expect AXGN’s revenue for the fiscal year (ending December 2024) to increase 16.1% year-over-year to $184.60 million.

Over the past three and five years, AXGN’s revenue income grew at CAGRs of 9.9% and 12.5%, respectively, while its total assets grew at 3.8% CAGR over the past five years.

The stock has gained 290.1% over the past year and 170.4% over the past six months to close the last trading session at $15.33.

AXGN’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

AXGN has an A grade for Growth and B for Sentiment. It is ranked #35 in the Medical - Devices & Equipment industry. Click here to see the other ratings of AXGN for Value, Momentum, Stability, and Quality.

Stock #1: Zimmer Biomet Holdings, Inc. (ZBH)

ZBH is a global medical technology company that designs, manufactures, and markets orthopedic reconstructive products, like knee and hip products, S.E.T. products, and craniomaxillofacial and thoracic products.

On August 7, ZBH signed an agreement to acquire OrthoGrid Systems, Inc., a privately held medical technology company focused on AI-driven surgical guidance systems for total hip replacement. This acquisition will help ZBH address the challenges of orthopedic problems with innovative technology solutions.

For the third quarter of 2024, which ended on September 30, ZBH's total revenues increased 4% year-over-year to $1.82 billion. Its operating profit rose 4.8% from the year-ago value to $279.50 million. The company’s adjusted net earnings stood at $353.20 million, up marginally year-over-year, while its adjusted EPS for the quarter increased 5.5% year-over-year to $1.74.

According to the company’s financial guidance for fiscal year 2024, ZBH forecasts revenue between 3.5%-4%. The company also expects adjusted diluted EPS to be between $7.95 and $8.05.

Street expects ZBH’s revenue for the fiscal fourth quarter (ending December 2024) to increase 3.9% year-over-year to $2.02 billion. Its EPS for the same period is expected to register a 4.3% growth from the prior year, settling at $2.30. In addition, it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is excellent.

ZBH’s normalized net income has grown at CAGRs of 8.7% and 3.8% over the past three and five years, respectively. Likewise, the company’s levered FCF has increased at a CAGR of 2.2% over the past five years.

ZBH’s stock has surged 5.2% over the past month to close the last trading session at $110.17.

ZBH’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has a B grade for Growth and Value. Within the same industry, it is ranked #17 out of 328 stocks. Click here to see ZBH’s ratings for Momentum, Stability, Sentiment, and Quality.

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SYK shares were trading at $369.10 per share on Thursday afternoon, up $0.08 (+0.02%). Year-to-date, SYK has gained 24.10%, versus a 26.40% rise in the benchmark S&P 500 index during the same period.

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