Home Medical stocks BofA: 3 Medical Device Stocks Seen Rising Higher

BofA: 3 Medical Device Stocks Seen Rising Higher


Shares in medical device makers are expected to get a boost as elective surgeries increase after plunging during the COVID-19 lockdowns.

The pandemic caused many elective surgeries to be canceled in the U.S., hurting demand for medical devices and supplies. 

BofA Securities analyst Bob Hopkins said his best bets in the sector for the rest of this year are Medtronic (MDT), Baxter International (BAX), and Stryker (SYK), which he all rates as “buys.”

“Our August checks indicate that surgical procedure trends continued to improve through August,” he recently wrote, according to Barron’s. “And we sense growing confidence in the durability of the improvement from medtech companies.”

Hopkins thinks Medtronic can rise from its current level of $105, to $130. Baxter can rise from $83 to $96, and Stryker can go from $202 to $245.

As the initial shutdowns whipsawed the broader market through the end of March, an index of U.S. hospitals suffered its worst quarterly slide since the 2008 Financial Crisis. While many on Wall Street have stressed that hospitals are more equipped to weather a second wave of cases, the key is for the industry to get back to some form of normal by year end.

Concern that patients may defer elective surgeries until cases subside or a vaccine is approved has been a hot topic among investors since the pandemic began. In addition to hospitals, shares of medical device makers such as Boston Scientific Corp. and Zimmer Biomet Holdings Inc. had been under pressure amid a dropoff in new heart valve surgeries or knee and hip replacements, Bloomberg reported.

For its part, Medtronic earlier this month said it would cut costs by $450 million to $475 million a year by fiscal 2023 as the medical device maker embarks on a restructuring exercise to create focused “operating units” from its existing businesses.

Medtronic generates most of its sales from devices such as defibrillators and pacemakers that are used to treat heart conditions.

The Dublin-based company said in a regulatory filing it would move to the new model beginning in its fiscal third quarter and that the operating units would focus on specific therapy areas.

The world’s largest standalone medical device maker is also assessing the impact of these changes to the reporting of its four business segments: minimally invasive therapies group, restorative therapies group, diabetes group and cardiac and vascular group, Reuters said.

As a result of the restructuring program, the company expects to incur $400 million-$450 million in costs by the end of fiscal 2022.

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