The healthcare industry has witnessed substantial capital inflows over the past year as the federal government spent liberally to fight the COVID-19 pandemic. This funding has allowed several companies to upgrade their operations with new machinery and equipment purchases and additional personnel.
As the country recovers from the public health crisis, elective surgeries and the healthcare needs of the growing U.S. elderly population should keep driving the industry’s growth.
Investors’ interest in healthcare stocks is evidenced by the Health Care Select Sector SPDR Fund’s (XLV) 5.4% gains over the past month. But the increasing investor focus has made many healthcare stocks expensive now. As such, we think affordable healthcare stocks Cigna Corporation (CI) and Cardinal health, Inc. (CAH) could be solid additions to one’s portfolio.
Cigna Corporation (CI)
CI is a health services company that offers medical and dental insurance and related products and services. The company operates through three segments—Evernorth, U.S. Medical and International Markets.
CI’s revenue increased 9.1% year-over-year to $41.71 billion in the fourth quarter, ended December 31, 2020. The company’s net income came in $4.13 billion, which represents a 323.2% increase from the same period last year. Its EPS was $11.45, up 340.4% from the year-ago value.
Analysts expect CI’s EPS to increase 9.8% year-over-year to $20.26 for its fiscal year 2021. It surpassed consensus EPS estimates in three of the trailing four quarters. Its revenue is expected to come in at $41.13 billion during the quarter ending June 30, which represents an 8.9% year-over-year rise.
On April 9, CI and Oscar Health Inc. (OSCR) jointly launched a new health insurance product named Cigna + Oscar, which is designed for small businesses. The product should help small businesses provide their employees with access to affordable, member-first, health insurance products. The stock has gained 40.6% over the past year to close yesterday’s trading session at $259.50.
CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Value, and a B grade for Sentiment, Growth and Quality. Click here to access CI’s ratings for Momentum and Stability as well.
CI is ranked #1 of 11 stocks in the B-rated Medical- Health insurance industry.
Cardinal health, Inc. (CAH)
CAH is a healthcare services and products company. The company operates through two segments: Pharmaceutical and Medical.
For its fiscal year 2021 second quarter, the company’s revenue increased 5% year-over-year to $41.5 billion. Its operating earnings were $461 million, indicating a 38% rise year-over-year. Its net earnings increased 185.9% from the prior-year quarter to $629 million. And its EPS stood at $2.13, representing an 184% rise from the same period last year.
Analysts expect CAH’s EPS to be $1.21 for the quarter ending June 30, which represents an 16.3% increase from its year-ago value. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 10% year-over-year to $40.40 billion for the current quarter.
On April 9, CAH introduced Cardinal Health Navista Tech Solutions (TS), an advanced suite of technology solutions. This latest launch should enable community oncologists to boost patient outcomes and lower costs with respect to their treatment while they shift to value-based care. The introduction is likely to bolster the performance of CAH’s Pharmaceutical segment. The stock has gained 31.9% over the past year and closed yesterday’s trading session at $62.02.
CAH’s POWR Ratings reflect this promising outlook. The stock has an overall A grade, which signals Strong Buy. It has an A grade for Value, and a B grade for Growth, Sentiment and Stability. Click here to see the additional POWR Ratings for CAH (Quality and Momentum).
CAH is ranked #4 of 78 stocks in the Medical – Services industry.
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CI shares were unchanged in after-hours trading Wednesday. Year-to-date, CI has gained 24.66%, versus a 11.56% 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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