Life science stocks have been under pressure since late 2022, but with profits expected to rebound in the high single digits in 2026 on average and potentially accelerate even further in 2027-30 due to upcoming catalysts, we see growing momentum in the industry’s profit growth trajectory.
The bottom line: With investors hyper-focused on the industry’s sub-10% profit growth outlook in 2026, we see a cluster of undervalued, wide-moat firms—Agilent A, Danaher DHR, Sartorius Stedim DIM, Thermo Fisher TMO, and Waters WAT—poised to benefit from accelerating profit growth from 2027-30.
- Industry shares have largely pulled back in early 2026 because of weaker-than-anticipated guidance for the year. While some pressures remain in early research applications, we appreciate that most life science end markets look healthy now, which should help profits accelerate a bit this year.
- Also, from 2027-30, profit growth could accelerate further due to higher demand for life science tools related to reshoring efforts by drug manufacturers and a refresh of instruments bought during the pandemic boom period, as they reach the end of their typical lifespans.
Between the lines: We see the potential for the broad life science industry’s growth rate to accelerate by about 200 basis points annually from 2027-30, primarily by pulling forward investments from future years and by pulling investments from non-US regions to the US.
- Typically, this industry grows around 5%, and we expect its growth rate to exceed that level in 2027 and then accelerate in 2028-29 before returning to a more normal rate in 2030 when most of the reshoring effects conclude.
- Accelerating industry growth in the medium term could be enough to boost sentiment in life science shares, and we see many undervalued options, even when including another reset period after 2030, before industry growth normalizes in the long run.
