From vaccine manufacturers to medical device makers, medical stocks offer investors diverse options for potential profits in the healthcare industry. Investing in medical stocks can offer a solid long-term investment strategy with the potential for significant returns.

Given this backdrop, let’s evaluate the strong fundamentals of HCA Healthcare, Inc. (HCA), Fresenius SE & Co. KGaA (FSNUY), and Tenet Healthcare Corporation (THC).

Despite the fear of recession and rising interest rates, the healthcare industry seems to perform quite well due to its non-cyclical nature. Other factors influencing the sector’s growth include an aging global population, increased healthcare spending, and the development of innovative therapies for chronic diseases.

The COVID-19 pandemic has accelerated the shift towards digitalization, telemedicine, and personalized medicine, all of which are expected to drive growth in the industry. The global healthcare IT market is projected to reach $974.50 billion by 2027, growing at a CAGR of 19.8%.

In addition, the growing need for healthcare services from small businesses, including clinics, labs, and other providers that cater to local communities, will likely increase the number of small healthcare practices in 2023.

According to IBISWorld, the number of companies specializing in primary care is expected to rise steadily at a yearly rate of 1.6%, reaching 152,496 businesses by 2027. Furthermore, the global hospital services market is forecasted to reach around $19.61 trillion by 2030 and is poised to grow at a CAGR of 8.7%.  

Regardless of high inflation rates and sluggish economic growth, the sector is expected to remain a bright spot this year. Therefore, fundamentally sound medical stocks HCA, FSNUY, and THC could be excellent additions to your watchlist in April.

HCA Healthcare, Inc. (HCA)

HCA is primarily engaged in providing healthcare services. The company operates several hospitals providing a range of medical and surgical services, including intensive and inpatient care, diagnostic, and emergency services. It also offers outpatient services, which include laboratory, radiology, respiratory therapy, cardiology, physical therapy, and outpatient surgery.

HCA’s revenue increased 2.9% year-over-year for the fourth quarter that ended on December 31, 2022, to $15.50 billion. The company’s attributable net income rose 14.7% year-over-year to $2.08 billion, while its EPS grew 26.6% from the prior-year quarter to $7.28. Also, its adjusted EBITDA increased marginally from the year-ago value to $3.18 billion.

For the fiscal year 2023, HCA expects its revenues to be between $61.50 billion and $63.50 billion. Adjusted EBITDA is expected to come in between $11.80 billion and $12.40 billion, while the company anticipates its EPS to be in the range of $16.40 – $17.60.

Street expects HCA’s revenue and EPS for the second quarter (ending June 2023) to increase 4.5% and 0.9% year-over-year to $15.49 billion and $4.25, respectively. Also, HCA’s revenue, EBITDA, and net income grew at CAGRs of 5.5%, 7%, and 17.2% over the past three years, respectively. Likewise, its EPS has grown at a CAGR of 23.9% in the same period.

Over the past nine months, the stock has gained 58.1% to close the last trading session at $271.45.

HCA’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Stability, Sentiment, and Quality. In the 11-stock Medical – Hospitals industry, it is ranked #1. To see additional POWR Ratings of HCA for Growth, Value, and Momentum, click here.

Fresenius SE & Co. KGaA (FSNUY)

Headquartered in Bad Homburg vor der Höhe, Germany, FSNUY is a healthcare company that provides products and services for dialysis, hospitals, and outpatient medical care. It operates through four segments: Fresenius Medical Care; Fresenius Kabi; Fresenius Helios; and Fresenius Vamed.

On February 16, the company announced that Kabi’s Biosimilar Stimufend® (pegfilgrastim-fpgk) is available for use in patients with non-myeloid malignancies receiving myelosuppressive anticancer drugs associated with a clinically significant incidence of febrile neutropenia.

It is the segment’s first U.S. biosimilar launch. Such expansion of the company’s global biosimilar portfolio, with a focus on oncology and immunology, is an important milestone in its Vision 2026 growth strategy.

FSNUY’s revenue increased 6.8% year-over-year for the fourth quarter that ended on December 31, 2022, to €10.64 billion ($11.66 billion). Its gross profit rose 2.7% from the year-ago value to €2.78 billion ($3.05 billion). Also, the company’s attributable net income and EPS came in at €445 million ($487.63 million) and €0.79 per share in the same period.

Analysts expect FSNUY’s revenue for the first quarter ended March 31, 2023, to increase 6.9% year-over-year to $11.02 billion. Also, the consensus revenue estimate of $11.23 billion for the current quarter (ending June 2023) represents a 10.3% year-over-year increase.

FSNUY’s revenue has grown at CAGRs of 4.9% and 3.8% over the past three and five years, respectively. Also, its levered FCF grew at a CAGR of 37% over the past three years.

The stock has gained 38.6% over the past six months to close the last trading session at $7.04.

It’s no surprise that FSNUY has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Value and Stability. Within the same Industry, it is ranked #2 of 11 stocks.

In addition to the POWR Ratings we stated above, we also have FNSUY’s ratings for Growth, Momentum, Sentiment, and Quality. Get all FSNUY ratings here.

Tenet Healthcare Corporation (THC)

THC is a diversified healthcare services company that operates through three segments: Hospital Operations; Ambulatory Care; and Conifer. Its general hospitals offer acute care services, operating and recovery rooms, radiology and respiratory therapy services, clinical laboratories, and pharmacies.

On February 8, United Surgical Partners International (USPI), the largest ambulatory surgery platform in the country and THC subsidiary, and Providence expanded their partnership to increase access to ambulatory surgical services across the United States in response to the growing demand for outpatient services. This development could boost THC’s ambulatory care revenues.

THC’s net operating revenue increased 2.8% year-over-year in the fourth quarter that ended on December 31, 2022, to $4.99 billion. During the same period, the company’s operating profit and net income amounted to $ 536 million and $274 million, respectively. Also, its adjusted EPS from continuing operations stood at $1.96.

THC’s EBIT and EBITDA grew at CAGRs of 9.7% and 6.9% over the past three years. Likewise, its total assets grew at a CAGR of 5.1% during the same period.

Analysts expect THC’s revenue for the first quarter (ended March 31, 2023) to increase 2.2% year-over-year to $4.85 billion, while its EPS is expected to be $1.14 in the same period. Moreover, it surpassed the EPS estimates in each of the trailing four quarters, which is impressive.

THC’s shares have gained 24.2% over the past three months and 36% year-to-date to close the last trading session at $66.34.

THC’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.

It also has a B grade for Growth, Value, and Sentiment. In the same industry, it is ranked #3 out of 11 stocks. Click here to see the other ratings of THC for Momentum, Stability, and Quality.

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HCA shares were trading at $269.50 per share on Wednesday afternoon, down $1.95 (-0.72%). Year-to-date, HCA has gained 12.58%, versus a 8.69% 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. More...

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