Friday, February 23, 2024
HomeMedicalKeyBanc picks Inspire, Integer, ICU Medical as top medtech ideas

KeyBanc picks Inspire, Integer, ICU Medical as top medtech ideas

KeyBanc Capital Markets has resumed coverage of nearly a dozen medtech companies, with Inspire (NYSE:INSP), Integer (NYSE:ITGR) and ICU Medical (NASDAQ:ICUI) as its top investment ideas.
The investment bank resumed coverage of ResMed (RMD), Alcon (ALC) and Steris (STE) at overweight and LeMaitre (LMAT), Cooper Companies (COO), Agiliti (AGTI) and Sotera Health (SHC) at sector weight. It also initiated coverage of UFP Technologies (UFPT) with a sector weight rating.
KeyBanc said it was taking a “constructive view” of the medtech sector “as industry fundamentals appear broadly positive” compared to the last few years.
“We would maintain or increase MedTech exposure into 2024 as we believe several limiting factors are now in the rearview, including previous COVID resurgences and subsequent staffing and supply chain challenges,” wrote the analysts in their note.
The analysts said they are expecting a return to mid-single digits or greater average growth, helped by a “healthy backdrop of hospital activity and elective procedural trends exiting 2023.” They added that most pre-announced or announced earnings have indicated that Q4 sales were above consensus.
KeyBanc also said it believes concerns about GLP-1 drugs eating into medtech sales “may be overstated.” It noted, however, that companies perceived to have greater exposure are still trading “well below” their highs, including Inspire and ResMed.
The bank also sees consumer healthcare spending remaining relatively steady as utilization is often tied to unemployment, which has remained low over the past few quarters.
“We are also encouraged by moderating inflation/CPI trends, which could represent a tailwind for consumer sentiment and discretionary healthcare spending, particularly compared to the last few years,” KeyBanc added.
KeyBanc said it likes Inspire, which has developed an implantable device for sleep apnea, for its first-mover status, continuing efforts to advance its technology and recent label expansions. KeyBanc rated Inspire as overweight with a price target of $278.
ICU Medical, which makes products such as infusion systems, is also rated overweight, with a price target of $134.
“We expect gradual recovery in organic growth trends, but acknowledge some near-term uncertainty,” wrote KeyBanc, adding that it also saw potential upside from an increased cadence of new pump placements and recurring revenue streams.
KeyBanc also favors Integer, a medical device outsource manufacturer.
“We see runway to sustain its ‘market + at least 200 bps’ growth objective with some potential upside,” due to steady mid-single digits underlying market volume growth, a shifting of investment spending towards higher growth areas, and “strengthened strategic relationships with several larger customers,” KeyBanc said.
It added that M&A was becoming a “more visible and material part of the long-term thesis.” KeyBanc rated Integer as overweight, with a price target of $125.

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