Key Points
- The European medtech sector has significantly underperformed the broader market this year.
- Analysts are cautious about 2026 due to challenges in China, tariffs, and a slowdown in procedures.
- Despite the overall weakness, J.P. Morgan identified several potential winners, with Fresenius as its top pick.
- Many other major firms, including Philips and Sonova, were rated “underweight,” signaling widespread industry challenges.
Europe’s medical technology sector is bracing for a challenging 2026, according to a new report from J.P. Morgan. For the fourth time in five years, the sector has lagged behind the broader market, delivering only 4% returns compared to the Stoxx 600 index’s 14% gain this year.
Analysts point to a range of hurdles constraining the industry, including ongoing challenges in the Chinese market, a slowdown in elective surgeries, tariff impacts, and a weaker U.S. dollar. J.P. Morgan’s team expects another slow year ahead, with most growth likely concentrated in the second half as companies navigate persistent headwinds.
Despite the gloomy overall outlook, the report highlights several companies that could still perform well. Fresenius remains the bank’s top pick, with analysts believing the company is undervalued given its strong growth prospects.
Other companies earning an “overweight” rating include Smith & Nephew, which is expected to improve its profit margins, and Straumann, which is seeing early signs of a recovery in the U.S. market. Convatec and Demant also received positive ratings, with analysts seeing clear growth paths.
However, the caution is widespread. Many other major players in the industry received less enthusiastic “neutral” or “underweight” ratings. J.P. Morgan flagged major companies such as Philips, Sonova, and Carl Zeiss as “underweight,” citing concerns about visibility and challenging market conditions. This mixed bag of ratings suggests that while opportunities exist, investors will need to be highly selective in the year ahead.
