The demand for medical products and solutions is growing quickly due to an aging population and increasing health consciousness. The global market for healthcare distribution is projected to reach $1.60 trillion in 2022 and $3 trillion by 2026, growing at a 20.2% CAGR The U.S. market is estimated to reach $580 billion in 2022, accounting for a 34.8% share in the global healthcare market. The bullish sentiment surrounding the industry is evident in the Health Care Select Sector SPDR ETF’s (XLV) 18% gains over the past year.
Despite the macroeconomic headwinds, rising inflation, and a geopolitical crisis caused by Russia’s invasion of Ukraine, the medical distribution industry has great growth prospects owing to growing demand. Furthermore, health care stocks have tended to be relatively resilient during the recent geopolitical crisis and market instability, given the sector’s inelastic demand.
Given the backdrop, it could be profitable to invest in the quality medical distribution stocks like AmerisourceBergen Corporation (ABC) and Henry Schein, Inc. (HSIC).
AmerisourceBergen Corporation (ABC)
ABC in Chesterbrook, Pa., sources and distributes pharmaceutical products in the U.S. and internationally. The company distributes generic pharmaceuticals, over-the-counter healthcare products, home health care supplies, and equipment. It also provides pharmacy management, staffing, consulting services, and packaging solutions to institutional and retail healthcare providers. ABC operates in two segments: Pharmaceutical Distribution; and Other.
In March, ABC extended its pharmaceutical supply agreement with Express Scripts Holding Company (ESRX) through 2026 to provide brand pharmaceuticals to pharmacies and patients. This partnership is expected to contribute to the company’s revenue streams.
ABC's revenues increased 13.5% year-over-year to $59.60 billion in its fiscal year 2022 first quarter, ended Dec. 31, 2021. Its adjusted gross profit improved 41.3% year-over-year to $2 billion. ABC’s operating income grew 21.4% from the prior-year period to $749.10 million. Its net income attributable to ABC increased 21% year-over-year to $545.39 million. And the company’s adjusted EPS grew 18.3% year-over-year to $2.58 in the fiscal first quarter.
Analysts expect ABC's revenue for its fiscal year 2022 second quarter, ending March 31, 2022, to come in at $57.19 billion, representing a 16.4% rise year-over-year. The Street expects the company's EPS for the current quarter to come in at $2.90, representing a 14.8% increase year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
Over the past year, shares of ABC gained 31.7% in price and 15.5% year-to-date. ABC closed yesterday’s trading session at $153.18. The stock is currently trading 1.7% below its 52-week high of $155.76, which it hit on March 21, 2022.
ABC’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which translates to Strong Buy in our proprietary system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ABC has a B grade for Stability, Sentiment, Growth, and Value. It is ranked #9 of 84 stocks within the Medical - Services industry.
To see additional POWR Ratings (Momentum, and Quality) for ABC, click here.
Click here to checkout our Healthcare Sector Report for 2022
Henry Schein, Inc. (HSIC)
HSIC in Melville, N.Y., distributes healthcare products and services to dental practitioners, government, institutional healthcare clinics, and physician practices worldwide. The company operates in two segments: Healthcare Distribution; and Technology and Value-Added Services. HSIC offers dental and surgical products, branded and generic pharmaceuticals, diagnostic tests, infection control products, and equipment. It also provides software technology and value-added services.
On March 2, 2022, HSIC announced that its subsidiary, Henry Schein One, had expanded the data analytics platform for dental service organizations (DSO) to allow private dental practices to accelerate business growth. This introduction of Jarvis analytics for private practices might boost HSIC’s global dental sales.
In its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, HSIC's net sales increased 5.2% year-over-year to $3.33 billion. The company's operating income grew 10.5% year-over-year to $205.10 million. HSIC’s net income increased 4.9% from the prior-year period to $150.70 million. And its earnings per share improved 7% year-over-year to $1.07 in its fiscal fourth quarter.
The $3.13 billion consensus revenue estimate for its fiscal year 2022 first quarter, ending March 31, 2022, represents a 7% year-over-year growth from the same period in 2021. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
Shares of HSIC increased 13.9% in price year-to-date and 33% over the past year. It closed yesterday's trading session at $88.17. The stock is currently trading 1.4% below its 52-week high of $89.44, which it hit on March 21, 2022.
HSIC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a grade of B for Value. Within the Medical - Devices & Equipment industry, it is ranked #19 of 168 stocks.
To see additional component grades of HSIC’s POWR Ratings (Quality, Stability, Growth, Sentiment, and Momentum), click here.
Click here to checkout our Healthcare Sector Report for 2022
ABC shares were trading at $152.40 per share on Tuesday afternoon, down $0.78 (-0.51%). Year-to-date, ABC has gained 15.06%, versus a -5.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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