The benchmark stock indices have of late registered solid gains on the back of solid third-quarter corporate earnings. The Dow Jones rose for the third straight day to claim another record on October 26. The S&P 500 also rose to fresh highs that day. According to CNBC, 80% of S&P 500 companies that have reported earnings so far have beaten Wall Street expectations.

The healthcare industry has been in the limelight since the onset of the pandemic. Pharmaceutical and biotech companies that have developed COVID-19 therapies and vaccines have generated billions of dollars in revenues so far. In addition, digital healthcare is gaining traction, with telehealth companies reporting a more than doubling of visits for 2020. The robust usage and popularity of digital healthcare are expected to drive more investments in this space. According to FactSet, companies with higher international revenue exposure are expected to deliver higher earnings growth. For companies generating more than 50% of sales outside the U.S., their blended earnings growth rate is 44.3%, versus a 26.3% earnings growth rate by companies with more than 50% of sales inside the United States.

Johnson & Johnson (JNJ), Abbott Laboratories (ABT), Anthem, Inc. (ANTM), and Biogen Inc. (BIIB), each with a significant global presence, have reported better than expected earnings results. So, considering their fundamental strength, we think these stocks could be solid additions to cash in on the industry’s growth.

Click here to checkout our Healthcare Sector Report for 2021

Johnson & Johnson (JNJ)

JNJ in New Brunswick, N.J. researches, develops, manufactures, and sells a range of healthcare products worldwide. It operates through three segments: Consumer Health; Pharmaceutical; and Medical Devices.

JNJ’s sales increased 10.7% year-over-year to $23.34 billion in its fiscal third quarter, ended September 2021. Its gross profit stood at $16.09 billion, up 14% from the same period last year. Its adjusted net earnings grew 18.7% from its year-ago value to $6.97 billion, while its adjusted EPS increased 18.2% year-over-year to $2.60. JNJ’s EPS beat analysts’ $2.35 expectations by 10.6%.

A $25.26 billion consensus revenue estimate for its fiscal fourth quarter (ending December 2021) indicates a 12.4% increase year-over-year. The Street expects the company’s EPS to rise 14.5% from the prior-year quarter to $2.13 in the current quarter. JNJ has an impressive earnings surprise history as well; it topped the consensus EPS estimates in each of the trailing four quarters.

JNJ has gained 1.2% in price over the past five days to close yesterday’s trading session at $165.75. The stock has gained 15.1% over the past year.

JNJ’s strong fundamentals are reflected in its POWR Ratings. JNJ has an overall A rating, which translates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

JNJ has an A grade for Stability, and a B grade for Growth, Value, and Quality. It is ranked #2 out of the 208 stocks in the Medical – Pharmaceuticals industry. Click here to view additional JNJ ratings for Momentum and Sentiment.

Abbott Laboratories (ABT)

ABT discovers, develops, manufactures, and sells health care products worldwide. It operates in four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices. ABT is headquartered in Abbott Park, Ill.

ABT’s net sales increased 23.4% year-over-year to $10.93 billion in the third quarter, ended September 30. Its operating earnings grew 70.2% from its year-ago value to $2.55 billion. ABT’s adjusted earnings from continuing operations came in at $2.52 billion, indicating a 43.1% rise year-over-year. The company’s adjusted EPS from continuing operations increased 42.9% year-over-year to $1.40, which exceeded the $0.94 consensus EPS estimate by 48.9%.

ABT raised its full-year adjusted earnings from continuing operations guidance to a range of $5.00 – $5.10 per share, compared with the earlier $4.30 – $4.50 range.

In addition, Street expects ABT’s revenues to advance 21.8% year-over-year to $42.15 billion in the current year. A $5.06consensus EPS estimate for the current year indicates a 38.6% improvement year-over-year. The company also surpassed the Street’s EPS estimates in each of the four trailing quarters.

Over the past year, ABT has gained 17.6% in price to close its last trading session at $128.13. The stock has gained 17% year-to-date.

It is no surprise that ABT has an overall rating of B, which equates to Buy in our POWR Ratings system. ABT has a grade of A for Sentiment, and a B for Stability and Quality. ABT is ranked #17 in the Medical – Pharmaceuticals industry. To see additional POWR Ratings for Growth, Value, and Momentum, click here.

Anthem, Inc. (ANTM)

ANTM operates as a health benefits company in the United States. It operates through four segments: Commercial & Specialty Business; Government Business; IngenioRx; and Other. ANTM is headquartered in Indianapolis, Ind.

ANTM’s total revenues increased 15% year-over-year to $35.82 billion in its fiscal third quarter, ended September 30. Its Total operating revenue grew 16% from its year-ago value to $35.55 billion, while its adjusted shareholder’s net income improved 56.5% year-over-year to $1.67 billion. The company’s adjusted EPS increased 61.7% year-over-year to $6.79, beating the $6.37 consensus estimate by 6.6%. This can be attributed to higher premium revenue due to its growth in Medicaid and Medicare.

Analysts expect ANTM’s revenues to increase 15.9% year-over-year to $36.54 billion in the current quarter, ending December 2021. A $5.11 consensus EPS estimate for the current quarter indicates a 101.2% rise from the same period last year. Furthermore, ANTM surpassed the Street’s EPS estimates in each of the trailing four quarters.

Shares of ANTM have gained 45.5% in price over the past year and 35.9% year-to-date to close yesterday’s trading session at $436.24.

ANTM’s promising outlook is reflected in its POWR Ratings. ANTM has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The stock has a B grade for Growth, Value, Sentiment, Stability, and Quality. Among the 11 stocks in the Medical – Health Insurance industry, ANTM is ranked #1. To see the ANTM rating for Momentum and additional details, click here.

Biogen Inc. (BIIB)

BIIB is a pioneer in neuroscience. It discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. BIIB has introduced the first approved treatment for spinal muscular atrophy and commercializes biosimilars of advanced biologics. It is based in Cambridge, Mass.

BIIB’s total revenue declined 17.7% year-over-year to $2.78 billion in the third quarter, ended September 30. Its non-GAAP net income attributable to the company decreased 20% from its year-ago value to $709.60 million. Also, the company’s non-GAAP EPS declined 15.4% year-over-year to $4.77. However, BIIB’s non-GAAP EPS exceeded the Street’s $4.09 expectation by 16.6%.

Following the better-than-expected earnings result, the company raised its earnings guidance. It now expects full-year earnings to come in between $18.85 and $19.35 per share, up from its previous guidance of between $17.50 and $19. In addition, BIIB expects its revenue to be between $10.8 billion and $10.9 billion, compared to previous guidance of $10.65 billion – $10.85 billion.

Street expects the company’s revenue and EPS to be $2.62 billion and $3.32, respectively, for the current quarter. BIIB has gained 10.7% year-to-date to close yesterday’s trading session at $271.12.

BIIB has an overall B rating, which translates to Buy in our proprietary rating system. It has an A grade for Value, and a B for Quality. It is ranked #14 of 507 stocks in the Biotech industry.

Beyond what we’ve stated above, we have also rated BIIB for Growth, Sentiment, Momentum, and Stability. Click here to view all BIIB ratings.

Click here to checkout our Healthcare Sector Report for 2021

JNJ shares were trading at $163.87 per share on Wednesday afternoon, down $1.88 (-1.13%). Year-to-date, JNJ has gained 6.05%, versus a 23.20% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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