The limitations of the global healthcare industry were exposed last year as the COVID-19 pandemic wreaked havoc globally. Nevertheless, the industry has been playing a vital role in protecting populations worldwide from the virus with its products and services. Also, the industry is now focusing on finding cures for other chronic critical illnesses and for solutions to stay ahead potential future pandemics. This, along with the integration of technology in healthcare services, should keep driving the industry’s growth. According to National Health Expenditure (NHE) data, national health spending is expected to reach $6.2 trillion by 2028.
Given the near-inelastic demand for healthcare products and services, healthcare companies are perceived as defensive companies. So, betting on healthcare stocks could help investors hedge their portfolios against current market volatility. Investors’ interest in the healthcare sector is evident in the Health Care Select Sector SPDR Fund’s (XLV) 14.3% returns over the past nine months.
So, we think it could be wise to bet now on fundamentally sound healthcare companies Abbott Laboratories (ABT), Agilent Technologies, Inc. (A), and Laboratory Corporation of America Holdings (LH).
Click here to checkout our Healthcare Sector Report for 2021
Abbott Laboratories (ABT)
ABT manufactures and sells health care products worldwide. It operates through four segments: established pharmaceutical products, diagnostic products, nutritional products, and medical devices.
The company’s revenue increased 35.3% year-over-year to $10.46 billion for the first quarter, ended March 31, 2021. ABT’s net income for the quarter was $1.79 billion, which represents a 217.8% increase from the same period last year. Its EPS came in at $1.00, up 222.6% from the year-ago value.
Analysts expect ABT’s EPS and revenue to increase 87.7% and 45.9%, respectively, year-over-year to $1.07 and $9.94 billion for the current quarter, ending June 30. It surpassed consensus EPS estimates in each of the trailing four quarters.
ABT announced on May 17 that it had received a CE Mark for its latest-generation transcatheter aortic valve implantation (TAVI) system—Navitor—making the minimally invasive device available for people in Europe with severe aortic stenosis who are at high or extreme surgical risk. With aortic stenosis cases expected to climb in Europe and the United States with their ageing populations, the demand for the device might increase significantly in the near-to-midterm. The stock has gained 19.5% over the past year to close yesterday’s trading session at $109.20.
ABT’s bright prospects are also apparent in its POWR Ratings. 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 has an A grade for Growth, and a B grade for Value, Quality and Stability. Click here to see the additional POWR ratings for ABT (Momentum and Sentiment).
ABT is ranked #15 of 231 stocks in the Medical-Pharmaceuticals industry.
Agilent Technologies, Inc. (A)
A provides application focused solutions for the life sciences, diagnostics, and applied chemical markets worldwide. It operates through three business segments: life sciences and applied markets, diagnostics and genomics, and its Agilent CrossLab business.
The company’s net revenue increased 23.2% year-over-year to $1.53 billion for its fiscal second quarter, ended April 30. A’s net income was $216 million, which represents a 113.9% year-over-year increase. Its non-GAAP EPS for the quarter increased 36.6% year-over-year to $0.97.
A’s EPS and revenue are expected to increase 25.9% and 16.3%, respectively, year-over-year to $4.13 and $6.21 million in 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters, which is impressive.
On June 2, A released its SureSelect Human All Exon V8, which is a new exome design that provides comprehensive content and up-to-date coverage of protein coding regions from RefSeq, CCDS, and GENCODE. Powered by machine learning-based probe design and an improved probe-printing process, the company’s sales are expected to increase with growing demand for this solution. Its stock has soared 50.7% over the past year to close yesterday’s trading session at $136.37.
A’s POWR Ratings are consistent with this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has a B grade for Growth, Value, Stability, Sentiment and Quality. Click here to see A’s ratings for Momentum as well.
A is ranked #3 of 56 stocks in the Medical-Diagnostics/Research industry.
Laboratory Corporation of America Holdings (LH)
LH is a life sciences company that provides clinical laboratory and end-to-end drug development services. The company operates through two segments: labcorp diagnostics (Dx) and labcorp drug development (DD). It serves primarily managed care organizations, biopharmaceutical companies, hospitals and health systems, and governmental agencies, among others.
LH’s revenue increased 47.4% year-over-year to $4.16 billion for the first quarter, ended March 31, 2021. The company’s net income was $769.60 million versus a $317.20 million loss in the prior-year period. Its adjusted EPS came in at $8.79, up 270.9% from its year-ago value.
For the current quarter, ending June 30, analysts expect LH’s EPS to increase 114.8% year-over-year to $5.52. It surpassed consensus EPS estimates in each of the trailing four quarters. The company’s annual revenue is expected to be $14.55 billion in 2021, up 4.1% year-over-year.
LH has expanded its drug development in the Asia-Pacific region with the addition of bioanalytical services in Singapore. The new bioanalytical laboratory is expected to support the development of both small and large molecular entities, while providing a complete range of regulated and non-regulated bioanalytical services. The stock has rallied 51.8% over the past nine months to close yesterday’s trading session at $265.18.
LH has an overall A rating, which translates to Strong Buy in our proprietary rating system. It has a B grade for Quality, Value, Growth and Stability. In addition to the POWR Ratings grades we’ve just highlighted we’ve also rated it for Stability and Momentum. Click here to see all LH ratings.
LH is ranked #2 in the Medical-Diagnostics/Research industry.
Click here to checkout our Healthcare Sector Report for 2021
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ABT shares were trading at $108.80 per share on Friday afternoon, down $0.40 (-0.37%). Year-to-date, ABT has gained 0.14%, versus a 13.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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