In addition to playing a major role in helping the world fight the COVID-19 pandemic, the healthcare industry is making solid progress in addressing the rising health issues faced by an aging global population. The integration of advanced technologies and rising capital inflows should drive the industry’s growth this year and beyond. Indeed, the global healthcare distribution market is expected to grow at 20.2% CAGR to $3.20 trillion by 2027.
Investors’ interest in the industry is evidenced by the Health Care Select Sector SPDR ETF’s (XLV) 6.3% gains over the past three months versus the SPDR S&P 500 Trust ETF (SPY) 5.3% returns. And, given the near inelastic demand for healthcare products and services, betting on fundamentally sound healthcare stocks could help to hedge one’s portfolio against a possible market correction in the near term.
GlaxoSmithKline plc (GSK)
Based in the U.K., GSK discovers, develops, manufactures, and markets pharmaceutical products, including vaccines, over-the-counter medicines, and health-related consumer products worldwide. The company focuses its research on respiratory diseases, HIV/infectious diseases, vaccines, immuno-inflammation, oncology, and rare diseases.
On September 6, 2021, GSK’s Consumer Healthcare segment launched its first carbon-neutral toothbrush, Dr.BEST GreenClean toothbrush. By leveraging renewable raw materials for high-performance oral care products, this toothbrush reduces the use of fossil fuels for virgin plastic. This marks a major step in GSK’s ongoing sustainability journey in oral care.
GSK’s JEMPERLI, a programmed cell death receptor-1 (PD-1) blocking antibody, has received accelerated approval from the U.S. Food and Drug Administration (FDA) for the treatment of adult patients with mismatch repair-deficient (dMMR) recurrent or advanced solid tumors. Based on its impressive tumor response rate and the durability of response, this FDA approval should enable GSK to secure expanded market reach in the coming months.
GSK’s revenues for its fiscal second quarter, ended June 30, 2021, increased 14.7% year-over-year to £8.09 billion ($11.28 billion). The company’s adjusted gross profit came in at £5.74 billion ($7.97 billion), up 6.9% from the prior-year period. Its adjusted operating profit has been reported at £2.16 billion ($2.99 billion) for the quarter, representing a 23.4% rise from the prior-year period. GSK’s adjusted net profit increased 32.5% year-over-year to £1.41 billion ($2.25 billion). Its adjusted EPS increased 46.4% year-over-year to 28.1 pence ($0.39). The company had £3.50 billion ($4.86 billion) in cash and cash equivalents as of June 30, 2021.
Analysts expect GSK’s revenue to increase 7.3% year-over-year to $12.04 billion in the current quarter, ending September 30, 2021. It surpassed The Street’s EPS estimates in each of the trailing four quarters. The stock’s EPS is expected to grow at a 4.4% rate per annum over the next five years. Over the past six months, the stock has gained 11.7% in price to close yesterday’s trading session at $39.76.
GSK’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 are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GSK has an A grade for Value and Growth, and a B grade for Stability and Sentiment. In the 216-stock Medical – Pharmaceuticals industry, it is ranked #5.
To see additional POWR Ratings for Momentum and Quality for GSK, click here.
Zoetis Inc. (ZTS)
ZTS discovers, manufactures, and markets veterinary vaccines, medicines, and diagnostic products complemented by genetic tests and a range of services worldwide. The company markets its products to veterinarians, livestock producers, retail outlets, and third-party veterinary distributors through its sales representatives and technical and veterinary operations specialists. ZTS is headquartered in Florham Park, N.J.
ZTS agreed to acquire Jurox, an Australian veterinary pharmaceutical manufacturer, on August 4, 2021. With this acquisition, ZTS will gain access to Jurox’s product portfolio, which is primed for greater global expansion and high-quality, local manufacturing operations across the Australian market.
On June 1, ZTS expanded its portfolio of horse care products with the addition of Pro-Stride APS, Restigen PRP, and CenTrate BMA, a range of devices designed to help address injuries common in horses that may cause lameness. These devices are expected to gain widespread acceptance across the horse health and well-being market. The company plans to sell these products to veterinarians through key distributor partners.
During the second quarter, ended June 30, 2021, ZTS’ revenue increased 25.8% year-over-year to $1.95 billion. The company’s non-GAAP gross profit came in at $1.38 billion, up 25.7% from the prior-year period. Its non-GAAP pre-tax income was $706 million, indicating a 28.8% rise from the prior-year period. ZTS’ non-GAAP net income was $566 million for the quarter, representing 32.6% from the year-ago period. Its non-GAAP EPS increased 33.7% year-over-year to $1.19. The company had $3.66 billion in cash and cash equivalents as of June 30, 2021.
Analysts expect ZTS’ EPS to grow 1.5% year-over-year to $1.12 in the current quarter, ending September 30, 2021. A $1.93 billion consensus revenue estimate for the current quarter represents an 8.2% rise from the prior-year period. The stock surpassed consensus EPS estimates in each of the trailing four quarters. ZTS’ EPS is expected to grow at a 13.5% rate per annum over the next five years.
ZTS has gained 37% in price over the past six months and 4.2% over the past month. It ended yesterday’s trading session at $205.
ZTS’ POWR Ratings reflect this promising outlook. The stock has an overall A rating, which translates to Strong Buy. ZTS has a B grade for Stability, Sentiment, and Quality. Moreover, it is ranked #8 of 216 stocks in the Medical – Pharmaceuticals industry.
In addition to the POWR Rating grades we’ve highlighted, one can see ZTS ratings for Growth, Value, and Momentum, here.
Mettler-Toledo International Inc. (MTD)
MTD in Columbus, Ohio, manufactures and markets precision, weighing, and analytical instruments for laboratory, industrial, packaging, logistics, and food retailing applications worldwide. The company also supplies end-of-line inspection systems used in food production and packaging, pharmaceutical, and other industries. It markets its products through its direct sales force and indirect distribution channels.
On March 24, 2021, MTD completed the acquisition of PendoTECH, a pharmaceutical company that serves biopharmaceutical manufacturers and life science laboratories. The acquisition will expand MTD’s offering to include various sensors and software for measuring, monitoring, and collecting data, primarily in bioprocess applications. Combining MTD’s process analytics and PendoTECH’s products and technologies has the potential to create one of the most comprehensive sensor offerings in the bioprocess market.
MTD’s net sales for its fiscal second quarter, ended June 30, 2021, increased 33.8% year-over-year to $924.35 million. The company’s gross profit came in at $536.90 million, up 34.9% from the year-ago period. Its adjusted operating profit has been reported at $255.26 million, representing a 44.5% increase from the prior-year period. MTD’s net earnings came in at $184.76 million, representing a 46% year-over-year improvement. Its adjusted EPS increased 53.1% year-over-year to $8.10. The company had 142.25 million in cash and cash equivalents as of June 30, 2021.
A $8.27 consensus EPS estimate for the current quarter, ending September 30, 2021, indicates a 17.8% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. Analysts expect MTD’s revenue to be $928.39 million for the current quarter, representing a 15% rise from the prior-year period.
MTD has gained 51.1%in price over the past six months and 5.2% over the past month. It closed yesterday’s trading session at $1555.48.
It’s no surprise that MTD has an overall A rating, which translates to Strong Buy in our POWR Ratings system. In addition, the stock has an A grade for Quality, and a B grade for Growth and Stability. Furthermore, the stock is ranked #3 of 58 stocks in the Medical – Diagnostics/Research industry.
Click here to see additional POWR Ratings in Value, Sentiment, and Momentum for MTD.
Smith & Nephew plc (SNN)
Based in the U.K., SNN is a medical technology company that manufactures and sells medical devices and services in orthopedics, endoscopy, and advanced wound management. It serves primarily healthcare providers.
On September 1, SNN introduced two significant new technologies to its total knee arthroplasty (TKA) portfolio–the JOURNEY II Medial Dished (MD) for TKA, and SYNC Performance Instruments. JOURNEY II Medial Dished (MD) is designed to provide more normal kinematics despite the condition or presence of the posterior cruciate ligament (PCL). Expected to enter the initial commercial release this fall, the company is looking forward to witnessing great demand and improving patient function and enabling smoother recovery.
In August, SNN launched WEREWOLF FASTSEAL 6.0 Hemostasis Wand, which delivers hemostatic sealing during open orthopedic procedures, thus reducing total blood loss and shortening procedure time significantly. The launch of the FASTSEAL 6.0 Wand expands the WEREWOLF platform, utilizing its leading radio-frequency technology. SNN expects to see high demand from orthopedic customers for the product in the coming months.
For the half-year ended July 3, 2021, SNN’s revenue increased 27.7% year-over-year to $2.60 billion. The company’s gross profit came in at $1.79 billion, indicating a 29.1% rise from the prior-year period. SNN’s adjusted operating profit was $459 million, representing a 166.9% increase from the prior-year period. While SNN’s adjusted net profit increased 190.6% year-over-year to $340 million, its adjusted EPS climbed 189.6% to $38.80. As of July 3, 2021, the company had $1.38 billion in cash and cash equivalents.
A $1.76 consensus EPS estimate for the current quarter represents a 36.4% rise from the prior-year period. Analysts expect SNN’s revenue to be $5.38 billion for the current quarter, representing an 18% rise from the prior-year period. SNN has lost 2.9% in price over the past month to close yesterday’s trading session at $37.14.
SNN’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, Stability, and Quality. Click here to see the additional ratings for SNN (Sentiment and Momentum).
Of the 182 stocks in the Medical – Devices & Equipment industry, SNN is ranked #12.
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GSK shares were trading at $39.45 per share on Tuesday afternoon, down $0.31 (-0.78%). Year-to-date, GSK has gained 11.96%, versus a 19.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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