The limitations of the global healthcare industry came to light in the early days of the COVID-19 pandemic. And governments worldwide have been trying to make up for its various inadequacies since. Based on extensive government investment, the U.S. healthcare industry has been able to make progress lately, mostly through widespread vaccine distribution. Also, the Biden administration is taking active steps to reinstate the Affordable Care Act, which is expected to boost the domestic healthcare industry. In fact, according to National Health Expenditure (NHE) data, national health spending is expected to reach $6.2 trillion by 2028.
Because most U.S. residents are expected to reschedule their postponed non-emergency health care needs in the near term, healthcare companies are expected to rebound quickly. Furthermore, as the country adopts precautionary steps to nip the growth of a fourth COVID-19 wave in the bud, the healthcare industry should be able to recover from losses it incurred last year and maintain modest operating margins this year.
Consequently, we think it is wise to bet on healthcare companies HCA healthcare, Inc. (HCA), Humana Inc. (HUM), and USANA Health Sciences, Inc. (USNA). They are expected to generate steady returns in the near- to mid-term.
HCA Healthcare, Inc. (HCA)
Founded in 1968, HCA operates general, acute care hospitals that offer medical and surgical services. These include inpatient care, intensive care, cardiac care, diagnostic, and emergency services, and outpatient services such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology, and physical therapy. The company owns and operates more than 180 hospitals and has more than 2,000 sites of care across 21 states in the U.S. and the U.K.
The company’s revenue for the fourth quarter, ended December 31, 2020, increased 5.7% year-over-year to $14.29 billion. Its non-GAAP ebitda increased 13.9% year-over-year to $3.12 billion. HCA’s net income was $1.43 billion, indicating a 33.1% year-over-year increase. Its EPS increased 33.7% year-over-year to $4.13.
Analysts expect HCA’s EPS to improve 41.6% year-over-year for the quarter ended March 31, 2021 to $3.3. Its $13.39 billion revenue estimate for the quarter ending June 30, 2021 represents a 32.7% increase year-over-year.
In February, HCA entered an agreement with Brookdale Senior Living Inc. (BKD) to acquire a majority stake in BKD’s home health and hospice business, which adds to HCA’s expansion plan in terms of its service outreach. HCA was also named as one of the 2021 World’s Most Ethical Companies by Ethisphere, a global leader in defining and advancing ethical business standards practices. The stock has gained 127.5% over the past year and closed yesterday’s trading session at $188.
HCA’s strong fundamentals are reflected in its POWR Ratings. The stock has an A overall 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 Growth, and a B grade for Value, Stability, Sentiment, and Quality. We’ve graded it for Momentum as well. Click here to access all HCA’s ratings.
HCA is ranked #1 of 10 stocks in the A-rated Medical – Hospitals industry.
Humana Inc. (HUM)
Based in Louisville, Kentucky, HUM operates as a health and well-being company. The company operates through three segments—retail, group and specialty, and healthcare- services. It also offers medical and supplemental benefit plans to individuals. It has a contract with Centers for Medicare and Medicaid Services to administer the Limited Income Newly Eligible Transition prescription drug plan program, among others.
For its fiscal year 2020 fourth quarter, ended December 31, HUM’s total revenue increased nearly 17% year-over-year to $19.06 billion. Its revenue from the retail segment increased 18.5% year-over-year to $16.83 billion, while its revenue from the healthcare-services segment increased 8.9% year-over-year to $7.29 billion. Its cash and cash equivalents for the quarter came in at $4.67 billion, up 15.3% year-over-year.
The company’s EPS and revenue are expected to increase 30.9% and 8.4%, respectively, year-over-year, for the quarter ended March 31, 2021. HUM also surpassed consensus EPS estimates in each of the trailing four quarters.
Humana Healthy Horizons, HUM’s Medicaid business, entered a partnership with GoNoodle on March 30 to help more than two million K-6th grade kids, their parents and teachers. The company also expanded its ties with EPIC in March, which stands as the most heavily used comprehensive health records database across the United States. HUM’s stock has gained 41.6% over the past year and closed yesterday’s trading session at $413.15.
HUM’s POWR ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has a B grade for Quality and Value also. In addition to the POWR Rating grades I’ve just highlighted, one can see HUM ratings for Sentiment, Stability, Growth, and Momentum here.
HUM is ranked #4 of 10 stocks in the B-rated Medical – Health Insurance industry.
USANA Health Sciences, Inc. (USNA)
USNA develops, manufactures and sells science-based nutritional and personal care products. The company operates mainly through two geographic segments: Americas and Europe, and Asia Pacific, which includes Southeast Asia Pacific, Greater China and North Asia. Its product lines include USANA Nutritional’s Essentials, Optimizers, Foods and Sense-beautiful science, among others.
USNA’s net sales of $310.52 million for its fiscal year 2020 fourth quarter, ended January 2, represents a 14.5% year-over year rise. Its gross profit has increased 12.3% year-over-year to $251.50 million, while its net income for the quarter was $39.63 million, up 28.9% year-over-year. Its EPS also increased 32.6% year-over-year to $1.87.
For the quarter ended March 31, 2021, analysts expect USNA’s EPS and revenue to increase 21.1% and 13.4%, respectively. Moreover, it surpassed consensus EPS estimates in each of the trailing four quarters.
Last December, USNA’s omega-3 supplement, BiOmega, received approval from ConsumerLab.com, a renowned third-party assessor. This helped the company attract the spotlight because the product supports cardiovascular, immune, and joint health. In addition to this, its strategic collaboration with Built Brands has helped it sell its own nutritional bars and create a bigger customer base. The stock has gained nearly 59% over the past year to close yesterday’s trading session at $99.39.
It’s no surprise that USNA has an A overall rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Quality and Value, and a B grade for Stability. Click here to see the additional POWR Ratings for USNA (Sentiment, Growth, and Momentum).
USNA is ranked #2 of 12 stocks in the A-rated Medical-Consumer Goods industry.
The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
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HCA shares were trading at $186.69 per share on Tuesday afternoon, down $1.31 (-0.70%). Year-to-date, HCA has gained 13.80%, versus a 9.00% 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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