The COVID-19 pandemic precipitated the biggest economic crisis of the century. However, the stock market has recovered and galloped ahead since its major correction in March 2020. The broader market hit several new highs last year and that momentum has been continuing so far this year. The S&P 500 has returned more than 45% over the past year. In fact, during Wednesday’s trading session, the Dow Jones Industrial Average hit a new intraday record, rising nearly 200 points at one point, and ending at a new closing high.
There are several factors that are influencing the market’s run. The most prominent of them is investors' growing optimism about a solid economic recovery this year. Also, the Biden administration has been making proactive economic decisions to help the country to recover quickly from the pandemic’s ravages. Following a $1.9 trillion rescue package, President Biden now aims to inject billions of dollars more into the economy through a sweeping infrastructure bill.
Because the Federal Reserve is maintaining its accommodative stance, consumer spending is steadily returning to pre-pandemic levels. Job growth has also been coming on strong over the past three months. Together with better-than-expected progress on the mass vaccination program, indicators of a solid economic recovery this year are strong. However, one fly in the ointment that is of concern to investors is the potential for inflation. Notably, the Consumer Price Index (CPI) rose 2.6%, year-over-year, in March this year--its highest level since 2018.
So, we think it wise for investors to pick stocks that have to potential to expand their profit margins even in the face of inflationary pressures. Given this backdrop, we think Daimler AG (DDAIF), Hologic, Inc. (HOLX), Getinge AB (GNGBY), and Hill-Rom Holdings Inc (HRC) could be worth adding to one’s portfolio now.
Daimler AG (DDAIF)
Germany-based DDAIF manufactures passenger cars, trucks, vans, and buses internationally. The company is one of the leading global suppliers of premium and luxury cars and one of the world’s largest manufacturers of commercial vehicles. It also sells vehicle spare parts and accessories. DDAIF operates through Mercedes-Benz Cars & Vans, Daimler Trucks and Buses, and Daimler Mobility segments.
DDAIF’s Mercedes brand recently introduced powerful and efficient all-wheel-drive variants of its EQS, EQB and EQE models. The shift to an all-electric vehicle should help the company capitalize on EV industry tailwinds. In fact, three more Mercedes-EQ world premieres should take place this year to further expand the line-up of six all-electric models. The company continues to extend its wide and attractive xEV product range by offering a total of some t 30 plug-in hybrid variants through year’s end.
In the first quarter, DDAIF’s revenue increased 10.2% year-over-year to €41.02 billion, due primarily to favorable sales momentum in all major regions, especially China. The company sold 728,609 cars and commercial vehicles worldwide during the quarter, which is 13% higher than the prior year quarter, supported by a strong product mix and favorable pricing. Its EPS for the quarter came in at €4.01, rising 4,355% from the year-ago value of $0.09.
Driven by the ongoing global economic recovery, the worldwide car market has grown significantly versus its volume in the previous year. Consequently, DDAIF’s management is confident the company’s margins will improve going forward on a sustainable basis. The stock has surged 162.3% over the past year and may gain more momentum. Analysts expect DDAIF’s current year revenue and EPS to improve 12.4% and 202.2%, respectively.
DDAIF’s POWR Ratings are consistent with this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
DDAIF has an A grade for Growth and Value. The stock is currently ranked #1 in the B-rated, 53-stock Auto & Vehicle Manufacturers industry.
In total, we rate DDAIF on eight different levels. Beyond what we stated above, we have also given DDAIF grades for Stability, Momentum, Sentiment and Quality. Get all DDAIF’s ratings here.
Click here to check out our Automotive Industry Report for 2021
Hologic, Inc. (HOLX)
HOLX develops, manufactures, and supplies diagnostics products, medical imaging systems, and surgical products for women's health through early detection and treatment in the United States, Europe, the Asia-Pacific, and internationally. It operates through four segments–Diagnostics, Breast Health, GYN Surgical, and Skeletal Health. HOLX has been seeing strong global demand for its two SARS-CoV-2 assays that run on the fully automated Panther and Panther Fusion systems.
HOLX has been on an expansion spree lately. On April 8, it inked a definitive agreement to acquire Mobidiag Oy, a privately held, commercial-stage Finnish-French developer of innovative molecular diagnostic tests and instrumentation, in a $795 million deal to further strengthen its international and diagnostics businesses. HOLX also acquired Europe-based molecular diagnostic assays and epigenetics products manufacturer, Diagenode, in March this year and Biotheranostics, a commercial-stage company that provides molecular diagnostic tests for breast and metastatic cancers, in February.
In its fiscal second quarter (ended March 27, 2021), HOLX’s top-line surged 103.4% year-over-year to $1.54 billion. Its $935.3 million in worldwide molecular diagnostics revenue represents a 390.6% increase , based on strong global demand for its coronavirus testing products. Notably, organic revenues also more than doubled year-over-year, driven by a strong recovery in its base businesses. The company’s EPS came in at $2.38, soaring 561.1% compared to the $0.36 year-ago value.
The stock has returned 30.3% over the past year. HOLX’s management has issued a conservative outlook for its COVID-19 test revenue for the current quarter, given the rapidly evolving market dynamics. However, one might expect continued demand for testing kits given the unrelenting spread of the virus in some regions of the world. Furthermore, HOLX’s Breast Health segment has also been gaining momentum, especially after the launch of its SuperSonic MACH 20 ultrasound system earlier this year. The Street further expects the company’s current year revenue and EPS to improve 38.6% and 91%, respectively.
It’s no surprise that HOLX has an overall B rating which translates to Buy in our POWR Ratings system. HOLX has an A grade for both Growth and Value. It is ranked #23 of 182 stocks in the Medical - Devices & Equipment industry.
In addition to the POWR Ratings grades I've just highlighted, you can see the HOLX ratings for Momentum, Stability, Sentiment and Quality here.
Click here to checkout our Healthcare Sector Report for 2021
Getinge AB (GNGBY)
Sweden-based GNGBY provides products and solutions for operating rooms, intensive-care units, sterilization departments, and life science companies and institutions in the Americas and internationally. The company operates through Acute Care Therapies, Life Science, and Surgical Workflows segments. In fact, GNGBY recently introduced a virtual hospital where customers could access its products.
On April 22, GNGBY received clearance from the U.S. FDA for several new software options for its Servo-u and Servo-n ventilators. The authorization has expanded GNGBY’s ventilator platform because it has options for personalized lung protection and personalized weaning solutions are at the forefront of respiratory patient health. In addition, GNGBY received clearance to introduce the Servo-u MR to the U.S. market--it’s a complement to its Servo Family--thus expanding the platform into the MRI space.
GNGBY reported impressive earnings for the first quarter, ended March 31. The company’s net sales increased organically by 12.6% year-over-year, driven by strong demand for its Sterile Transfer and ECMO therapy products. But the its orders declined organically by 22.8% compared to the prior year when the company reported exceptional COVID-19-relatedorder intake. However, GNGBY delivered many advanced ICU ventilators during the quarter and saw improved demand for its cardiovascular procedure products. Its EPS for quarter also soared 136% from its year-ago value.
The stock has surged 83.8% over the past year. In addition to launching a holistic solution for the sterilization of bioreactors for laboratory environments in the first quarter of 2021, the company is undertaking restructuring measures at its production site in Germany. The program is expected to be completed by year’s end. Hence, GNGBY aims to improve its margins by implementing higher volumes, a favorable product mix and lower costs. Notably, management expects 2 - to 4% organic annual growth in net sales over the long term.
GNGBY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. GNGBY also has a grade of A for both Growth and Value. It is ranked #2 in the Medical - Devices & Equipment industry.
Click here to see the additional POWR Ratings for GNGBY (Momentum, Stability, Sentiment and Quality).
Click here to checkout our Healthcare Sector Report for 2021
Hill-Rom Holdings Inc (HRC)
HRC operates as a medical technology company worldwide. In addition to offering medical surgical beds and intensive care unit beds, the company provides patient monitoring and diagnostics products, non-invasive therapeutic products and surfaces, surgical solutions, and information technologies and software solutions. It operates through Patient Support Systems, Front Line Care, and Surgical Solutions segments.
HRC recently unveiled major technological advances to its market-leading physical assessment tools with the launch of its new Welch Allyn PanOptic Plus Ophthalmoscope and the Welch Allyn MacroView Plus Otoscope. The improvements are designed to support earlier diagnosis and treatment.
HRC’s net revenue increased by 5% year-over-year to $762 million in its fiscal second quarter (ended March 31, 2020), driven by continued recovery across all three business segments and improved demand for critical care products. Its Patient Support Systems revenue increased 4%, due to international expansion of med-surg and ICU bed systems, growth in U.S. bed system rentals to support customers in the treatment of COVID-19, and a return to double-digit growth across the company's care communications platforms. Its adjusted EPS came in at $1.73, rising 35% from the year-ago value.
HRC generated more than $160 million in new product revenue in its last reported quarter, an increase of 20%, and launched several innovative products, such as Nurse Call, Alarm and Alert Management, and digital engagement platform, Experience App. In addition , HRC has been witnessing accelerated recovery across its patient monitoring equipment business and other key products because physician office visits are steadily returning to the pre-pandemic levels. The stock has returned 10.5% so far this year but could generate higher returns. Analysts estimate HRC’s revenue and EPS for the current year will grow 2% and 9.6%, respectively.
It’s no surprise that HRC has an overall A rating, which translates to Strong Buy in our POWR Ratings system. HRC has A grade for Value, and B for Sentiment. It is ranked #7 in the Medical - Devices & Equipment industry.
In addition to the POWR Ratings grades I've just highlighted, one can see the HRC ratings for Growth, Momentum, Stability and Quality here.
Click here to checkout our Healthcare Sector Report for 2021
DDAIF shares were trading at $87.90 per share on Thursday morning, up $1.46 (+1.69%). Year-to-date, DDAIF has gained 25.04%, versus a 11.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies.
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