Medical Products Stocks Awake; Edwards, Cambrex, Zimmer Among Them

By | May 10, 2016

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As a group, the medical products companies have been trading sideways for months, perhaps basing after a long advance. But some stocks in the group look ready to assume leadership if the market can find a way to sustain a rally. The group was ranked No. 44 as of Monday, up from No. 104 six weeks ago. Ten of the 120 stocks in the group have Composite Ratings of 95 or higher. Every bull market seems to include leadership from stocks in the medical sector. The sector is driven by technological advances and an aging population that needs more care. The companies that come out with a groundbreaking drug or device are the ones that soar. One of the stars of the group is Edwards Lifesciences ( EW ), with a Composite Rating of 99. The company specializes in the areas of heart disease and critical care monitoring. On April 4, the stock gapped up and closed 16.9% higher after Edwards announced that tests of a device used in heart surgery, its Sapien 3 valve, showed better results with lower mortality rates and fewer strokes. Year-over-year earnings growth has been 25% or higher in four of the last five quarters. And growth is steady and expected to remain so. The five-year annualized EPS growth rate is 21%, while analysts forecast 20% growth this year and 19% next year. Cambrex ( CBM ) is another stock in the group with a 99 Composite Rating. The stock broke out of a cup-with-handle base with a 47.03 buy point after reporting better-than-expected earnings April 29. The stock remains in buy range. With six manufacturing facilities in the U.S., Europe and India, Cambrex makes active pharmaceutical ingredients for drugs. Nearly two-thirds of 2015 sales came from development of new ingredients for drug companies. The catalyst for the breakout was an earnings report. EPS was 50 cents, blowing away estimates of 34 cents and boosting profits 72% from a year earlier. Zimmer Biomet ( ZBH ) has set up in a cup-with-handle base with a 117.87 buy point. It’s a long base — 63 weeks so far — but unlike many bases these days that have corrected 40% to 50%, it managed to correct a reasonable 28%. Zimmer makes dental and orthopedic implants. A quarter of its business is hip implants, 36% is knees, and 21% relates to surgical, sports medicine, extremities and trauma cases. It’s a company that’s benefiting from an aging population. In an investor presentation, it noted that the global population over 65 years old will grow from 7.6% in 2010 to 16.2% in 2050. Scalper1 News

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