What will happen in the medical device industry over the next few years? Zacks Equity Research analyzed the current situation and where the field is headed in the future.
Here are five key trends in the report:
1. Medical device companies are still looking to move headquarters overseas despite the government crackdown on the tax inversion strategy. Companies like Medtronic and Stryker have said they'll go through with the move despite heavy scrutiny and fines. Steris also plans to move headquarters to the United Kingdom after acquiring Synergy Health.
2. Mega-mergers are becoming the norm. The Federal Trade Commission approved Medtronic's acquisition of Covidien, and other smaller orthopedic device companies are looking to become giants in order to compete with giants in the market. Companies like Wright Medical merged with Tornier and Stryker could continue transaction activity in the future.
3. Companies are acquiring across the globe to create a footprint in international markets. In the orthopedics device space, companies in China and the Asia Pacific have become increasingly attractive as the potential in emerging markets is great. The United States has one-third of the global market share, but there is a slowdown there as well as in other mature markets as growth is larger in emerging markets, according to the report.
4. Zacks advised against "names that offer little growth/opportunity over the near term." The stocks that weren't inspiring all held Zacks Rank #4. The companies mentioned in the article include Accuray, Baxter Internatioanl, Thermo Fisher Scientific, Varian Medical Systems and Thoratec.
5. Many of the large companies are trying to gain share in the implantable cardioverter-defibrillator markets with new product launches, including Medtronic, Boston Scientific and St. Jude Medical. The medtech stocks Zacks think are "worth a look" are those with Zacks #2 ratings, including AmerisourceBergen, CR Bard, Cardinal Health and Quest Diagnostics.