MedTech Sector is near its lows-what is going on? Update-2… 7/28/26

7/29/26...Earnings: GE Healthcare (GEHC) up 11.46% on a beat with EPS $1.13 on $5.3B revenue and record orders.

7/28/26…Rotation out of Tech and Chip stocks brings in buyers to the healthcare sector including depressed MedTechs. For example , Abbott Labs  (ABT) at $107.27, which we recommended about 3 mos. ago is up 14% YTD but up 25 pts since the May lows at $82.53!

• The IHI iShares at 52.69 should reflect better times ahead for the US Medical device industry but it might be better to pick socks with better prosopects like Medtronic (MDT) at  $86.88 up 7.29 % over 5 days and upgraded to buy today by UBS.
• We recently added to Baxter  International (BAX) and Becton-Dickinson (BDX) as well both long time laggards.
• We were very successful trading Quidel/Ortho (QDEL)  and the stock is still trading at a P/S of 0.43 and a FWD/PE of 6.78. A good M& A deal should take this stock to $20.
• GE Healthcare Technologies (GEHC)  reports tomorrow so maybe you’ll find another bargain.

=======

MedTech Sector is Near its Multi-Year Lows But M and A Offers a Way

• Leading MedTech Companies Abbott and Johnson and Johnson find Innovative Ways to improve results.
• IHI a US Medical Device ETF is still near the bottom at $50.58.
• High hopes for intuitive Surgical with Q2 revenues up 19% and non-GAAP EPS up 28%; procedure growth slows.

From about 2018 through 2022 this was a hot sector but since 2022 one the best funds Fidelity Select Medical Technology (FSMEX) is down  41.41%  over five years! So what happened to account for the underperformance? We tried to offer answers like low procedure growth, tariffs and the pandemic but hope to dig deeper as we go through Q2 2026 earnings. These are some of the best blue chip medical device companies the world. Earnings are out for a few of them but Johnson and Johnson is a biopharma leader also rather than a pure play US Medical Device Company. Over the years JNJ has been re- engineered to become a formidable “medicines” Company with a strong product line  in MedTech focused in.cardiology. Over the years the Company spun off Ortho see (QDEL), OTC medicines like Tylenol see (KVUE) and JNJ baby powder, and brought in new drugs from its wholly owned company, Janssen.. Recent earnings results were impressive:

• Recent JNJ earnings beat on strong Q2 revenues of $25.3 B an increase of 6.6% from the Q2 of 2025 with an EPS of$2.27 compared to $2.29 in 2025. The guidance for 2026 revenues was increased to $101.!B with EPS up 0.18 to $11.58. Growth in the Innovative Medicines unit generated quarterly sals of $16.4B , a 7.8% increase over previous quarter. Growth was driven by cancer treatments Darzalex and Carvykti, as well as immunology drugs Tremfya and others in that category, and neuroscience products Spravato and Caplyta. The MedTech unit recorded $8.93 billion in quarterly sales, up 4.5% from a year earlier, missing the $8.97 billion that analysts had anticipated, according to Reuters.
• Abbott beat Q2 estimates with Revenue of $12.6B with EPS of 41.31 and raised EPS guidance to 5.45 to $5,60. Sales in Abbott’s diagnostics business jumped 42%. The segment was boosted in part by mid-teens growth of the cancer test Cologuard, which is benefiting from a growing base of new and repeated customers. Medical devices sales rose 9% and established pharmaceuticals sales rose more than 8%. Revenue in the nutrition segment fell 3.1% due to lower sales volumes and the effect of recent pricing.
• So JNJ restructured is MedTech and Pharmaceuticals whereas Abbott is Diagnostics and Devices (MedTech).

LONG ABT, BDX, GEHC, MDT, QDEL, WAT, FSMEX.