The healthcare industry is well-positioned for significant expansion, driven by evolving demand amid the growing prevalence of chronic diseases and an aging population. Also, recent technological advances such as AI, big data analytics, and precision medicine have fueled the market prospects.

Amid this backdrop, investors could consider investing in quality healthcare stocks Alcon Inc. (ALC), Becton, Dickinson and Company (BDX), and STERIS plc (STE) which are transforming towards patient care through innovation.

The global healthcare industry is currently undergoing significant changes owing to the challenge of quality, access, and affordability for the public worldwide. However, the adoption of intuitive technology like artificial intelligence (AI) also presents possible solutions to enhance processes and increase efficiency.

Recently, R&D initiatives by healthcare organizations have also increased exponentially in segments like medical devices and pharmaceuticals. With this development, the global medical devices market is predicted to reach a staggering revenue of $508 billion in 2024. The industry is expected to grow at a CAGR of 5.7%, resulting in a projected volume of $669.70 billion by 2029.

In global comparison, the U.S. medical devices market size is projected to grow from $188.68 billion in 2024 to $314.96 billion by 2032, expanding at a CAGR of 6.6% driven by the increasing prevalence of chronic diseases, increasing healthcare expenses, and the existence of major manufacturers.

Also, rising investments by medical device companies for innovation to enhance their patent portfolios and leveraging AI have opened lucrative deals and avenues. AI technologies improve healthcare operations and patient care, and the US is the leading country in its adoption, with the highest number of AI-related patents, jobs, and deals.

Given these favorable market trends, let’s look at the fundamentals of the top three Medical – Devices & Equipment stocks, beginning with the third choice.

Stock #3: Alcon Inc. (ALC)

Headquartered in Geneva, Switzerland, ALC researches, develops, manufactures, distributes, and sells eye care products for eye care professionals and their patients globally. The company operates through the Surgical segment and the Vision Care segment.

On June 24, ALC’s UNITY® Vitreoretinal Cataract System (VCS) and UNITY® Cataract System (CS) received the FDA 510(k) clearance. These innovations introduced significant workflow efficiencies over the company's current market-leading systems. Unity VCS and Unity CS are also the first innovations to be introduced from ALC's highly anticipated Unity portfolio.

Further, on March 12, ALC launched the Clareon® Family of intraocular lenses in India. Clareon provides consistent visual outcomes and exceptional clarity that lasts as it was developed through ALC’s most advanced IOL material.

ALC’s net sales and other revenues for the second quarter that ended June 30, 2024, increased 3.1% year-over-year to $2.50 billion. Its gross profit grew marginally from the year-ago value to $1.37 billion. The company’s net income and EPS totaled $223 million and $0.45, up 31.9% and 32.3% from the prior year's quarter, respectively.

The company has maintained its 2024 outlook from the prior announcement. Net sales of ALC are forecasted between $9.90 billion and $10.10 billion, while its core EPS is expected to be $3 to $3.10.

Street expects ALC’s revenue and EPS for the third quarter (ending September 2024) to increase 6% and 11.5% year-over-year to $2.47 billion and $0.74, respectively. Also, the company has topped the consensus EPS estimate in three of the trailing four quarters.

Shares of ALC have surged 10% over the past six months and 15.6% over the past year to close the last trading session at $94.47.

ALC’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. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has an A grade for Stability. It also has a B grade for Growth. Within the Medical – Devices & Equipment industry, ALC is ranked #41 out of 132 stocks.

Click here to access additional ratings of ALC for Momentum, Sentiment, Value, and Quality.

Stock #2: Becton, Dickinson and Company (BDX)

BDX develops, manufactures, and sells medical supplies, devices, laboratory equipment, and diagnostic products for healthcare institutions, physicians, life science researchers, clinical laboratories, the pharmaceutical industry, and the general public internationally. It operates in three segments: BD Medical; BD Life Sciences; and BD Interventional.

On September 3, BDX completed the acquisition of Edwards Lifesciences' Critical Care product group, to be renamed BD Advanced Patient Monitoring. The acquisition enables various future innovation opportunities and expands BDX's portfolio of smart connected care solutions with leading monitoring technologies, like advanced AI-enabled clinical decision tools.

On July 25, BDX and Quest Diagnostics (DGX), a leader in diagnostic information services, entered a global collaboration agreement to develop, manufacture and commercialize flow cytometry-based companion diagnostics. This can help in selecting the best treatment for patients with cancer and other diseases.

During the third quarter that ended June 30, 2024, BDX’s adjusted revenues increased 3.7% year-over-year to $5.06 billion. Its operating income grew 9.7% from the year-ago value to $602 million. The company’s net income and EPS came in at $487 million and $1.68, reflecting growths of 19.7% and 23.5% year-over-year, respectively.

As per the company’s fiscal 2024 guidance, BDX expects adjusted revenue of $20.10 billion to $20.20 billion. It expects adjusted EPS between $13.05 and $13.15, at a projected growth of 6.9% to 7.7%.

Analysts expect the company’s EPS for the fourth quarter (ending September 2024) to increase 10.1% year-over-year to $3.77, while its revenue is expected to grow 5.1% year-over-year to $5.34 billion. Moreover, BDX surpassed the consensus EPS estimates in three of the trailing four quarters.

BDX’s shares have gained marginally over the past six months to close the last trading session at $236.34.

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

The stock has a B grade for Sentiment, Stability, and Growth. Within the Medical – Devices & Equipment industry, BDX is ranked #27 out of 132 stocks.

In addition to the POWR Ratings we’ve stated above, we also have BDX ratings for Quality, Momentum, and Value. Get all BDX ratings here.

Stock #1: STERIS plc (STE)

STE offers infection prevention products and services worldwide. The company operates through three segments: Healthcare; Applied Sterilization Technologies (AST); and Life Sciences.

On July 31, STE announced to distribute a quarterly interim dividend of $0.57 per share representing a $0.05 increase in the dividend. The dividend is payable on September 20, 2024, to shareholders of record at the close of business on September 5, 2024.

STE pays an annual dividend of $2.28, which translates to a yield of 0.94% at the current share price. Its four-year average dividend yield is 0.86%. Moreover, the company’s dividend payouts have increased at a CAGR of 9.3% over the past three years. STERIS has raised its dividends for 13 consecutive years.

For the fiscal 2025 first quarter that ended June 30, 2024, STE’s revenues increased 8.1% year-over-year to $1.28 billion. Its adjusted gross profit rose 8.8% from the year-ago value to $576.61 million. Adjusted net income attributable to shareholders and adjusted EPS came in at $212.64 million and $2.14, up 7.3% and 7% year-over-year, respectively.

In addition, the company’s cash and cash equivalents and total assets stood at $198.33 million and $10.11 billion as of June 30, 2024.

For the fiscal year 2025, STE expects adjusted net income from continuing operations per share between $9.05 and $9.25. And its free cash flow is anticipated to be $700 million.

Street expects STE’s revenue for the fourth quarter (ending March 2025) to increase marginally year-over-year to $1.50 billion. The company’s EPS for the same quarter is expected to grow 2.7% year-over-year to $2.65. Also, the company surpassed the consensus revenue and EPS estimates in all of the trailing four quarters.

STE’s stock has increased 3.1% over the past six months and 7.5% over the past year to close the last trading session at $239.84.

STE’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

STE has a B grade for Sentiment, Stability, and Growth. It is ranked #13 out of 132 stocks in the same industry.

In addition to the POWR Ratings we’ve stated above, we also have STE ratings for Momentum, Value, and Quality. Get all STE ratings here.

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BDX shares were trading at $233.94 per share on Thursday afternoon, down $2.40 (-1.02%). Year-to-date, BDX has declined -3.29%, versus a 16.29% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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