Throughout 2024, MedTech stocks held a significant position in the portfolio of several investors. Despite several macroeconomic softnesses, the dynamic nature of the sector, marked by innovation and resilience, attracted investors throughout the year.
The industry experienced significant growth and innovation, driven by technological advancements and increasing demand for personalized healthcare solutions. As the healthcare landscape continues to evolve, the MedTech sector, encompassing medical devices, diagnostics and digital health, is experiencing rapid transformation.
Per a report by Statista, the MedTech market in the United States is estimated to grow at a steady annual rate of 4.83% from 2024 to 2029. Among the various markets, medical devices stand as the largest, with a projected volume of $181.00 billion for 2024.
In addition, the ongoing trend toward value-based care, which emphasizes improved patient outcomes at reduced costs, propelled demand for MedTech products. The convergence of artificial intelligence (AI), robotics and data analytics brought new possibilities in areas like surgical robotics, wearable health devices and remote patient monitoring.
Meanwhile, the cost of MedTech’s inputs has risen, with factors such as inflation and expensive commercial models resulting in high selling, general and administrative (SG&A) expenses. Additionally, challenges such as supply-chain disruptions and regulatory hurdles pressurized industry players. Despite such dull macroeconomic conditions, the MedTech industry remained resilient and continued to attract significant investment.
While there were many industry-specific drawbacks to be concerned about in 2024, the upbeat quarterly results, rise in demand on new product sales, successful innovation and product line expansion, strong clinical study results as well as a continued strong performance of legacy products propelled the large-cap MedTech sector to perform better compared to the mid and small-cap stocks this year. Moreover, these encouraging factors are expected to drive the sector’s growth in 2025 as well.
Here we have picked four large-cap MedTech stocks, namely McKesson Corporation MCK, ResMed Inc. RMD, Penumbra, Inc. PEN and Cardinal Health, Inc. CAH, which are likely to continue their strong performance next year.
MedTech in 2025
In 2025, the MedTech industry is expected to continue its growth trajectory. Advancements in AI, robotics, and minimally invasive procedures are set to transform healthcare delivery, boosting demand for next-generation medical devices and diagnostic tools. According to a Business Research Company’s report, AI in the medical devices market size has experienced an extraordinary surge, propelling from $15.42 billion in 2023 to an estimated $97.07 billion by 2028, showcasing a remarkable compound annual growth rate of 44.6%.
Additionally, the growing focus on preventative care and digital health solutions should further expand the sector, which might gain from the Trump administration's plans, which include corporate tax cuts and a pro-innovation regulatory approach.
Balancing margin growth and profitability while keeping the cost of care in check and navigating an uncertain macro environment could be challenging for the MedTech players in 2025. Investors will remain keenly focused on the companies’ ability to expand margins.
4 MedTech Stocks to Bet On
Based on strong fundamentals and healthy prospects, we have shortlisted stocks that are expected to continue their winning streak in 2025.
For this, we have taken the help of the Zacks Stocks Screener to choose stocks that have a market cap of more than $9 billion and currently carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). Our research shows that Zacks Rank #1 or 2 stocks offer the best investment options. Moreover, these have outperformed the industry this year.
Here are four MedTech stocks that meet the criteria:
McKesson: In the past year, McKesson has outperformed the industry. Improving product prices are boosting the company’s sales. McKesson's distribution business continues to benefit from a higher volume of specialty products, including an increase in volume from retail national account customers. Its slew of tie-ups and buyouts are encouraging.
Moreover, improving demand for healthcare-related technologies and a rise in prescriptions from third-party logistics are key factors driving revenues from the Prescription Technology Solutions segment.
McKesson Corporation Price
McKesson Corporation price | McKesson Corporation Quote
McKesson, carrying a Zacks Rank #1 at present, has an expected earnings growth rate of 19.3% for fiscal 2025, much higher than the industry’s 6.4%. The company has a favorable current cash flow growth rate of 0.4% compared to the industry’s 5.2% decline. For fiscal 2025, its revenues are expected to grow 16.2%.
ResMed: The company is benefiting from its robust Mask business, where a digital health ecosystem powers resupply programs. It continues to see strength in the global supply of its cloud-connected platforms. The strong uptake of the myAir - consumer patient engagement app is likely to drive higher adherence to therapy in patients. The company’s continuous efforts to invest and expand in theglobal marketlook encouraging.
ResMed, carrying a Zacks Rank #2 at present, has an expected earnings growth rate of 21.0% for fiscal 2025, much higher than the industry’s 11.2%. The company has a favorable current ratio of 2.92 compared to the industry’s 2.29. For fiscal 2025, its revenues are expected to grow 8.8%.
ResMed Inc. Price
ResMed Inc. price | ResMed Inc. Quote
Cardinal Health: Cardinal Health’s Pharmaceutical segment is the second largest pharmaceutical distributor in the United States. The segment has been a key catalyst for growth, and the company continued to see robust demand for GLP-1 medications.
CAH has been benefiting from an expanding portfolio of safe products. The company maintains its continued focus on evolving growth areas with investments and partnerships in Specialty, at Home and Services. Cardinal Health’s joint ventures and long-term supply agreements with several firms bode well.
Cardinal Health, Inc. Price
Cardinal Health, Inc. price | Cardinal Health, Inc. Quote
Cardinal Health, carrying a Zacks Rank #2 at present, has a long-term earnings growth rate of 10.2% compared with the industry’s 9.5%. The company has a favorable current cash flow growth rate of 16.1% compared to the industry’s 5.2% decline. The company beat on earnings in each of the trailing four quarters, delivering an average surprise of 11.2%.
Penumbra: The company demonstrates consistent revenue growth momentum, driven by strong patient outcomes with Lightning Flash, Lightning Bolt 7 and RED 72. The growth trend of the company’s vascular and neuro businesses is encouraging. A strong pipeline of products is another upside. Penumbra’s immersive Healthcare business, too, is making progress.
Internationally, the company projects early success with the launch of its first-generation computer-aided products in Europe.
Penumbra, Inc. Price
Penumbra, Inc. price | Penumbra, Inc. Quote
Penumbra, carrying a Zacks Rank #2 at present, has an earnings growth rate of 34.4% for 2024, much higher than the industry’s 16.7%. The company has a favorable current ratio of 5.82 compared to the industry’s 2.41. For 2024, its revenues are expected to grow 12.5%.
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McKesson Corporation (MCK) : Free Stock Analysis Report
ResMed Inc. (RMD) : Free Stock Analysis Report
Penumbra, Inc. (PEN) : Free Stock Analysis Report
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