Ventilator Stocks Next Big Thing In Coronavirus-Hit Market?

The crippling impact of the coronavirus outbreak in the United States and worldwide has resulted in a wide shortage of treatment options. Hence, MedTech giants as well as non-healthcare stalwarts are collectively bracing up to sail through these difficult times in terms of bringing better healthcare devices and services to the patients. If the coronavirus-led market bloodbath has spooked you, then these are the stocks that might help enrich your portfolio, given the demand spike the companies are about to witness in the days to come.

Let’s delve deeper.

Ventilators — Key Equipment of the Hour

The number of critical-stage coronavirus patients has been soaring for quite some time now. In the United States alone, there are 795 patients, at present, in this stage. Internationally, the number of serious-to-critically ill coronavirus patients is nearing 11,000. If we take the Chinese data as standard, the mortality rate of this stage is 61.5% (study by The Lancet) and the key supportive treatment is mechanical ventilation, either invasively or non-invasively.

Recently, President Trump too urged the state governors to arrange for ventilators in order to meet the nationwide escalating demand. Going by a Fortune article, most ICUs currently have ventilators to meet demand of a regular flu season but do not have additional units in case of a demand surge. With the rapidly-spreading pandemic, experts are worried that such a situation might overwhelm hospitals, forcing doctors to implement triage systems, just like Italy is doing right now, to decide on who gets ventilation treatment.

In the wake of such difficult times, last week medical device stalwart Medtronic (NYSE:MDT) decided to more than double its capacity to manufacture and supply ventilators. Given the turbulence times, the company is also prioritizing high risk/high need areas for ventilator allocation on a weekly basis for efficient global distribution through supply chains. When all other major business segments of this Zacks Rank #3 (Hold) company are facing recessionary hurdles, Medtronic’s latest initiative seems strategic. This is anticipated to boost its Minimally Invasive Therapies Group revenues in the upcoming period.

Royal Philiips (NYSE:PHG) too has decided to ramp up manufacturing of its critical care products to meet the rising global demand. These products include patient vital signs monitors and portable ventilators, and medical consumables for non-invasive and invasive ventilation to treat a broad range of respiratory conditions. The company is particularly augmenting the production of hospital ventilators, and plans to double production within the next eight weeks and achieve a four-fold increase by third-quarter 2020. This Zacks Rank #3 stock will, undoubtedly, grab investors’ attention in the near term.

Another player in this field, which has been witnessing a significant demand spike for its devices, is ResMed (NYSE:RMD) . Despite the global supply disruption and the shut-down of its Singapore facility due to coronavirus outbreak, the company has conformed reallocation of resources away from producing other devices to meet the growing need of masks and ventilators (The Japan Times). The stock currently carries a Zacks Rank of #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Non-MedTechs Entering the Ventilators Space

Trump yesterday, in a tweet, announced that three major non-healthcare forces would be setting foot in the ventilator-manufacturing space. He stated that Ford Motor (NYSE:F) , General Motors (NYSE:GM) and Tesla (NASDAQ:TSLA) have already received the green light to make ventilators and other metal products. Per a Reuters’ report, Elon Musk said he had a discussion regarding ventilator production with Medtronic.

General Motors too has agreed to manufacture hospital ventilators. As per a Bloomberg report, the company’s CEO Mary Barra stated that General Motors might use some of its excess factory space to build ventilators.

We expect the above-mentioned non-MedTech bigwigs, all carrying a Zacks Rank #3 currently, to witness a surge over the next few months, if the respective deals materialize.

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