Thanks to strong drivers such as an aging population, increased spending on healthcare by developing nations, and technological advancements in medical devices and prescription drugs, healthcare stocks have outperformed the broader market. Over the past year, the Health Care Select Sector SPDR ETF (XLV) has gained 2.7%, outpacing the S&P 500, which lost 6.8%.
In addition, according to Verified Market Research, the global healthcare market is projected to reach $665.37 billion by 2028. Despite still-elevated inflation, total health expenditure is expected to continue on an upward trend across the globe for the next five years and reach $6.20 trillion, as per the Centers for Medicare and Medicaid Services.
With many economists expecting a recession at some point this year and given the industry’s recession-resistant nature and strong prospects, investing in fundamentally sound healthcare stocks Thermo Fisher Scientific Inc. (TMO), Abbott Laboratories (ABT), and Centene Corporation (CNC) could be just what the doctor has ordered for your portfolios.
Thermo Fisher Scientific Inc. (TMO)
TMO offers life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products and services worldwide. It provides its products and services through various brands, including Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific, and Unity Lab Services.
On January 3, TMO acquired The Binding Site Group, a global leader in specialty diagnostics and monitoring of multiple myeloma. Amid a rapidly growing diagnostics segment, this acquisition should expand and complement existing specialty diagnostics offerings with established technologies, delivering strong clinical value for patients.
TMO’s revenue increased 7% year-over-year to $11.45 billion for its fiscal fourth quarter that ended December 31, 2022. The company’s adjusted net income and non-GAAP EPS came in at $2.12 billion and $5.40, respectively, for the same period. Over the past three years, TMO’s revenue and EPS have increased at CAGRs of 20.7% and 24.3%, respectively.
Street expects TMO’s EPS and revenue to increase 2.9% and 1.3% year-over-year to $5.67 and $11.11 billion, respectively, in the fiscal second quarter ending on June 30, 2023. TMO surpassed the EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 5.6% over the past three months to close the last trading session at $559.70.
TMO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has a B grade for Value and Sentiment. TMO is ranked #9 of 53 stocks in the Medical – Diagnostics/Research industry.
We’ve also graded TMO for Growth, Momentum, Stability, and Quality. Click here to access all TMO ratings.
Abbott Laboratories (ABT)
ABT discovers, develops, manufactures, and sells diversified healthcare products. The company operates through four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices.
On February 17, the company declared a quarterly common dividend of 51 cents per share, payable to its shareholders on May 15, 2023. This marks ABT’s 51st consecutive year of dividend growth and the 397th consecutive quarterly dividend payment. This reflects the company’s strong cash generation.
On February 8, ABT announced a definitive agreement for the acquisition of Cardiovascular Systems, Inc. (CSII), a medical device company that offers innovative solutions for treating vascular and coronary disease. After this acquisition, ABT is expected to gain an innovative, complementary solution in treating vascular disease through CSII’s leading atherectomy system.
For the fiscal year that ended December 31, 2022, ABT’s net sales increased 1.3% year-over-year to $43.65 billion. During the fourth quarter that ended December 31, 2022, the company’s operating earnings stood at $1.30 billion. Its adjusted net earnings came in at $1.81 billion, while adjusted earnings per common share came in at $1.03.
Analysts expect ABT’s EPS and revenue for the fiscal year 2024 (ending December 31, 2024) to increase 10.1% and 5.5% year-over-year to $4.85 and $42.15 billion, respectively. The company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is excellent.
Over the past three months, the stock has gained 4.1% to close the last trading session at $106.74.
ABT’s POWR Ratings reflect this solid prospect. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Value, Stability, Sentiment, and Quality. Out of 147 stocks in the Medical – Devices & Equipment industry, it is ranked #10. Click here to see ABT’s ratings for Growth and Momentum.
Centene Corporation (CNC)
CNC is a multinational healthcare company that provides government-sponsored and commercial healthcare programs, focusing on underinsured and uninsured individuals. It also provides education and outreach programs to inform and assist members in accessing appropriate healthcare services. It operates through the Managed Care and Specialty Services segments.
On January 3, the company’s Health Net of California subsidiary was granted new Medi-Cal direct contracts by the California Department of Health Care Services (DHCS). This should help CNC expand its reach, deliver member-focused care, and improve health outcomes.
"We are pleased to have been issued contracts by DHCS and look forward to pioneering new and innovative approaches to improve access to quality care and drive health equity for the millions of members we serve," said Brian Ternan, Health Net's President and CEO.
On December 5, 2022, CNC announced that it had completed the divestiture of Magellan Rx to Prime Therapeutics LLC. This is expected to help the company focus on its core business and strategic priorities.
For the fiscal year 2022 that ended December 31, 2022, CNC’s total revenues increased 14.7% year-over-year to $144.55 billion. The company’s adjusted net earnings increased 10.6% year-over-year to $3.36 billion. Also, its adjusted EPS increased 12.2% year-over-year to $5.78.
The consensus EPS estimate of $2.01 for the first quarter (ending March 31, 2023) represents a 9.8% improvement year-over-year. Moreover, its EPS is expected to increase by 13.5% per annum over the next five years. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has lost 4.4% to close the last trading session at $73.76.
CNC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has a B grade for Value, Sentiment, and Quality. Within the A-rated Medical - Health Insurance industry, it is ranked #4 out of 11 stocks. Click here to see the other ratings of CNC (Growth, Momentum, and Stability).
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TMO shares were trading at $559.70 per share on Monday morning, up $2.12 (+0.38%). Year-to-date, TMO has gained 1.64%, versus a 6.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 Health Care Stocks That Have Just What the Doctor Ordered StockNews.com
