The healthcare industry has been the hot ticket over the past two years with the COVID-19 pandemic taking a toll worldwide, companies’ rush to develop vaccine candidates, and government initiatives to rollout vaccination programs and contain the virus’ spread. After a period of calm, U.S. health experts now expect another uptick in COVID-19 cases due to an emerging, highly contagious COVID omicron variant called BA.2. Furthermore, a top FDA official expects people may need another COVID booster shot this fall because the immunity from previous shots could wane.
Several Wall Street practitioners have been warning that a recession could be imminent, pointing to some recession signals. On Monday, the U.S. 5-year and 30-year Treasury yields inverted for the first time since 2006. This has been a reliable predictor of past recessions, raising fears of a possible forthcoming recession.
The healthcare sector tends to be relatively recession-proof due to the relatively inelastic demand for its products and services. Therefore, we think healthcare stocks Johnson & Johnson (JNJ), Roche Holding AG (RHHBY), AbbVie Inc. (ABBV), Novo Nordisk A/S (NVO), and Novartis AG (NVS) could be good bets now to withstand a recession.
Click here to checkout our Healthcare Sector Report for 2022
Johnson & Johnson (JNJ)
JNJ is engaged in the research and development, manufacture, and sale of a range of products in the healthcare field. The New Brunswick, N.J.-based company operates through three segments Consumer; Pharmaceutical; and Medical Devices.
This month, the European Medicines Agency recommended using JNJ and its partner Legend Biotech Corp’s CAR-T therapy to treat multiple myeloma. The treatment was approved in the United States nearly a month ago. The approvals should be beneficial for the companies.
JNJ’s sales increased 10.4% year-over-year to $24.80 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its non-GAAP net earnings grew 14.4% from its year-ago value to $5.68 billion, while its non-GAAP EPS improved 14.5% year-over-year to $2.13.
Analysts expect JNJ’s revenue for its fiscal quarter ending March 31, 2022, to come in at $23.79 billion, indicating a 6.6% increase year-over-year. The company’s EPS is expected to grow 0.6% year-over-year to $2.61. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.
JNJ has gained 7.1% in price over the past year and 8% over the past month to close the last trading session at $177.74.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating , which translates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
JNJ also has an A grade in Stability and a B in Sentiment, Quality, and Value. It is ranked #3 of 175 stocks in the Medical – Pharmaceuticals industry.
Beyond what is stated above, we have also rated JNJ for Momentum and Growth. Get all the JNJ ratings here.
Roche Holding AG (RHHBY)
RHHBY is a Basel, Switzerland-based healthcare company. Its operating businesses are organized into two divisions: Pharmaceuticals; and Diagnostics. The Pharmaceuticals division consists of two business segments, Roche Pharmaceuticals and Chugai, while the Diagnostics division consists of four business segments: Diabetes Care; Molecular Diagnostics; Professional Diagnostics; and Tissue Diagnostics.
On March 25, RHHBY announced that the CHMP had recommended the approval of the Polivy combination for the treatment of previously untreated diffuse large B-cell lymphoma (DLBCL). This will be the first treatment regimen over the last 20 years that significantly improves outcomes in this disease. Post the CHMP’s final approval, this could prove a milestone development for the company.
Also, RHHBY has formed a collaboration with Bristol-Myers Squibb Co. (BMY) to advance personalized healthcare through digital pathology solutions. Given the growing market for personalized healthcare, this partnership should prove strategic.
In the same month, the company announced the availability of testing solutions that can identify the omicron subvariants BA.1, BA.1.1, BA.2, BA.2.2, BA.3, and Delta, while addressing the ongoing concern over the omicron BA.2 subvariant. This should be in demand, given the increasing COVID cases worldwide.
RHHBY’s group sales increased 7.7% year-over-year to CHF62.80 billion ($67.31 billion) in its fiscal year ended Dec. 31, 2021. Its core operating profit improved 1.7% year-over-year to CHF21.90 billion ($23.47 billion). And its core EPS increased 3.4% from its year-ago value to CHF19.81.
The 17.68 billion consensus revenue estimate for its fiscal first quarter, ending March 31, 2022, represents an 8.6% improvement year-over-year. Also, the $17.31 billion revenue estimate for the next quarter, ending June 30, 2022, represents a 0.8% increase year-over-year. The company topped the Street’s EPS estimates in three of the trailing four quarters.
RHHBY stock has gained 24.2% in price over the past year and 11% over the past six months to close the last trading session at $50.15.
RHHBY’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system.
RHHBY has an A grade in Stability and a B grade in Value and Quality. It is ranked #13 in the Medical – Pharmaceuticals industry.
To see additional POWR Ratings for Momentum, Growth, and Sentiment for RHHBY, click here.
AbbVie Inc. (ABBV)
ABBV in North Chicago, Ill., is a research-based biopharmaceutical company that researches and develops, manufactures, commercializes, and sells medicines and therapies.
This month, ABBV announced that Health Canada had approved SKYRIZI® (risankizumab) to treat adult patients with active psoriatic arthritis, expanding ABBV’s immunology portfolio in Canada.
On March 17, 2022, ABBV announced that the U.S. FDA had approved RINVOQ to treat moderately to severely active ulcerative colitis (UC) in adults. “With the approval of RINVOQ as a new treatment option, AbbVie continues our leadership in advancing research that can help impact the lives of people living with ulcerative colitis,” said Thomas Hudson, MD, senior vice president of research and development, chief scientific officer, AbbVie.
The company also announced that LASTACAFT is now available as an over-the-counter medicine that does not require a prescription and will be available in online and retail stores. This over-the-counter switch expands its retail eye drop portfolio and should help expand its customer reach.
ABBV’s net revenues increased 7.4% from the prior-year quarter to $14.89 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its operating earnings for the quarter were $5.07 billion, reflecting a 35.2% increase year over year, while the net earnings attributable to ABBV stood at $4.04 billion, up 11,133.3% year-over-year. The company’s EPS increased 22,500% year-over-year to $2.26.
The $3.15 consensus EPS estimate for its fiscal first quarter, ending March 31, 2022, represents a 6.9% improvement year-over-year. The $13.65 billion consensus revenue estimate for the same quarter represents a 5.5% increase from the same period last year. It has an impressive earnings surprise history; it topped Street EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 52% in price and 49% over the past six months. It closed the last trading session at $162.18.
It is no surprise that ABBV has an overall B rating, which equates to Buy in our POWR Ratings system.
ABBV also has a B grade in Value and Quality. The stock is ranked #16 in the Medical – Pharmaceuticals industry.
In addition to the POWR Rating grades I have just highlighted, one can see the ABBV’s growth, Momentum, Stability, and sentiment ratings here.
Novo Nordisk A/S (NVO)
NVO is a healthcare company that researches, develops, manufactures, and markets pharmaceutical products worldwide. It operates in two segments Diabetes and Obesity care; and Biopharm. It is headquartered in Bagsvaerd, Denmark.
On March 29, 2022, NVO announced the U.S. FDA's approval of a higher dose of 2.0 mg of Ozempic to treat adults with type 2 diabetes. Ozempic is expected to help adults with type 2 diabetes achieve and maintain their individualized glycemic targets and remain on the same medication for longer. With the FDA approval, this product should garner significant returns for the company in the coming months, given the increasing prevalence of type 2 diabetes.
NVO’s net sales increased 19.3% year-over-year to DKK38.33 billion ($5.69 billion) in its fiscal fourth quarter, ended Dec. 31, 2021. Its gross profit improved 21% year-over-year to DKK32.09 billion ($4.77 billion) over the period, while its net profit increased 16.9% from its year-ago value to DKK10.89 billion ($1.62 billion). The company’s EPS was DKK4.76, up 18.7% over the period.
NVO’s revenue for its fiscal year ending Dec. 31, 2022, is expected to come in at $23.62 billion, indicating 10.4% year-over-year growth. The company’s EPS is expected to increase 6.3% year-over-year to $3.35 in the same period. NVO also beat the consensus EPS estimates in each of the trailing four quarters.
NVO’s shares have gained 61% over the past year to close the last trading session at $110.20. The stock has gained 14.7% in price over the past six months.
NVO’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The company also has an A grade in Quality and a B in Value and Stability. The stock is ranked #7 in the Medical – Pharmaceuticals industry.
To get NOV’s ratings for Growth, Momentum, and Sentiment, click here.
Novartis AG (NVS)
NVS is a Basel, Switzerland-based pharmaceutical company that develops, manufactures, and markets branded and generic prescription drugs, active pharmaceutical ingredients (APIs), biosimilars, and ophthalmic products.
NVS announced that the CHMP had a positive opinion on the approval of Jakavi after its Phase III REACH2 and REACH3 clinical studies. If approved, Jakavi would be the first JAK1/2 inhibitor available for 12 years or older patients suffering from GvHD. This brings the company a step closer to approval in Europe and could add significantly to the company’s revenue stream on commercialization.
The company also announced CHMP’s positive opinion on Kymriah, a CAR-T cell therapy, to treat adult patients with relapsed or refractory follicular lymphoma (FL). If approved, Kymriah would provide a definitive and new option for the disease with a highly favorable safety profile. “We are proud to bring our transformative cell therapy innovation to more people around the world who continue to have unmet medical needs,” said Susanne Schaffert, Ph.D., President, Novartis Oncology.
For its fiscal fourth quarter, ended Dec. 31, 2021, NVS’ net sales to third parties increased 3.6% year-over-year to $13.23 billion. Its gross profit grew 8.3% from its year-ago value to $9.55 billion, while the net income for the quarter stood at $16.31 billion, reflecting a 676.8% increase year-over-year. Its EPS was $7.24, up 687% from the prior-year quarter.
The Street expects NVS’ EPS for its fiscal year ending Dec.31, 2022 to improve 0.8% year-over-year to $6.34. The $53.36 billion consensus revenue estimate for the same period represents a 3.4% increase year-over-year.
NVS’s shares have gained 5.6% in price over the past six months. The stock has gained marginally over the past month to close the last trading session at $87.51
The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system.
NVS is also rated an A in Stability and a B in Growth, Quality, and Value. The stock is ranked #1 in the Medical – Pharmaceuticals industry.
Click here to see additional POWR Ratings for Momentum and Sentiment for NVS.
Click here to checkout our Healthcare Sector Report for 2022
JNJ shares were trading at $178.71 per share on Wednesday afternoon, up $0.97 (+0.55%). Year-to-date, JNJ has gained 5.14%, versus a -2.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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