Medtech companies are increasingly positive about macro trends amid the easing of supply and inflation headwinds in some areas and the anticipated improvement of staffing issues, according to analysts at RBC Capital Markets.
After hearing from 20 medical device companies in August and September, the analysts picked up on a shift in tone in the industry. The macro trends that have pressured medtech companies throughout the year remain issues but signs of improvement have changed the mood.
The analysts’ view is informed by comments from companies including Baxter, Boston Scientific, Edwards Lifesciences, Johnson & Johnson, Medtronic, Stryker and Zimmer Biomet.
Rising energy prices in Europe, lockdowns in China, inflation and a potential economic slowdown remain top of mind for investors, according to the analysts, but commentary from medtech management teams suggests some things are improving.
“Notably, staffing issues are expected to improve, which is a key driver of broader procedure volume recovery; inflation/supply headwinds are easing in certain areas even though there is some risk around semi/electronic components; and pricing is less of a headwind than initially thought,” the analysts wrote.
Executives at Boston Scientific, Medtronic and Nevro said hospital staffing has stabilized, with the latter going as far as saying the situation may have improved a little in the third quarter. The overall impression is that staffing will remain a challenge in the upcoming third quarter results, a message that the analysts took away from their talk with Edwards, but that hospitals have found ways to manage the situation better.
The comments about inflation have a similar tone. Boston Scientific and Medtronic reported a stabilization of the situation that has seen costs rise because the impact of fuel prices on shipping and other factors. The analysts said Medtronic sees inflation stabilizing at current, higher than historical levels, while Boston Scientific said the situation may have improved a little.
Component supply, an issue linked to inflation, also looks set to improve. Medtronic expects supply challenges, notably shortages of resin and sterile packaging trays, to ease significantly by the end of October. While that suggests those shortages will have less impact during the second half of Medtronic’s fiscal year, the impact of semiconductor supply issues is expected to linger into 2023.