Like their biopharmaceutical colleagues, publicly listed medical technology companies have roared out of the gate this year as investors flood back into health care. Companies have benefited from record-breaking market highs being driven by a increased optimism that the U.S. economy is poised to enjoy better times ahead.

To track the market progress of the sector, we have created the Medical Devices Index, which will complement the MDD Stock Report. This price weighted index will record and track on a monthly basis the stock price performance of 20 of the leading medical technology companies that have been selected from the list of more than 70 public companies tracked by MDD.

So far this year the index has grown more than 8 percent in value ahead of the buoyant general markets with the Dow Jones Industrial Average climbing 5 percent and the Nasdaq Composite Index up 7 percent. The health care sector has been a favorite among investors with companies in our companion BioWorld Biopharmaceutical Index also benefiting – pushing the index up 12 percent year to date. (See Medical Devices Index, below.)

LEADING GAINERS

Driving the value of the Medical Devices Index is Abbott Laboratories, with shares up more than 18 percent since the beginning of the year. The company completed its acquisition of St. Jude Medical Inc. in January, and posted in their year-end financials that worldwide sales increased 2.2 percent on a reported basis and 4.8 percent on an operational basis. (See Medical Device Daily, Jan. 5, 2017.)

On their earnings call, senior management reflected their optimism about the company's prospects with growth expected to accelerate in the second half of the year, driven by new product launches across the diagnostic, diabetes care and medical device components of their businesses.

Marlborough, Mass.-based Boston Scientific Corp. has also started the year in fine style with its shares (NYSE:BSX) climbing 14 percent. The company reported a strong fourth quarter and was also positive for its 2017 outlook. It generated sales of $2.1 billion during the fourth quarter ended Dec. 31, 2016, a growth of 11 percent compared to the prior year period on a reported and operational basis.

For the year, the company achieved full year sales of $8.38 billion, a 12 percent growth.

RBC Capital Markets analyst Glenn Novarro said the company "is one of the best multiyear growth stories in large-cap med tech, led by a string of new product launches in 2018/2019."

The new product approvals, combined with cost cutting and operating leverage will be able to deliver mid-teens EPS growth over the next three years, which is above the industry average Novarro noted.

Investors were also enthusiastic about the prospects for Westbrook, Maine-based Idexx Laboratories Inc. whose shares have grown in value by 24 percent. The company, focused on veterinary diagnostics, generated revenues for the fourth quarter of 2016 of $443 million, an increase of 11 percent compared to the prior year period on a reported basis and 12 percent on an organic basis. For the full year revenues were $1.775 billion, an increase of 11 percent on both a reported and organic basis. The company also reaffirmed its full year 2017 organic revenue growth outlook of between 9 percent and 10.5 percent.

Editor's note: The Medical Devices Index will next be published at the end of the first quarter.