Environmental, social, and governance (ESG) investing has not only introduced versatility and inclusiveness into corporate board rooms, it has also provided many retail investors with opportunities to make investments consistent with their values. According to Morningstar, U.S. sustainable funds generated $15.7 billion in net inflows in the third quarter of 2021. Also, BlackRock’s iShares has predicted that investment in this space will grow to $1 trillion by 2030.
In addition, the COVID-19 pandemic has changed consumers’ outlook to now value healthier and more sustainable lifestyles. It is no longer exclusively physical health that consumers are seeking. Instead, holistic development that includes environmental health, food health, mental health, and social health are in much greater demand. The pandemic has accelerated trends in health and sustainability, thereby driving changes in consumer behavior. Furthermore, the global healthcare cloud computing market, which can be viewed as a branch of the sustainable healthcare industry, is expected to grow at a 28.5% CAGR CAGR between 2020 – 2026.
Given this backdrop, we think it could be wise for socially conscious investors to bet on fundamentally strong ESG healthcare stocks Johnson & Johnson (JNJ), Bristol-Myers Squibb Company (BMY), AmerisourceBergen Corporation (ABC), and DENTSPLY SIRONA Inc. (XRAY).
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures & sells a range of products in the healthcare field worldwide. It operates through three segments: Consumer Health; Pharmaceutical; and Medical Devices. Its Health for Humanity 2025 Goals focus on citizenship and sustainability efforts. JNJ’s total ESG risk score is 29. JNJ is headquartered in New Brunswick, N.J.
On June 9, 2021, JNJ published its 2020 Health for Humanity Report, which noted that 54% of the company’s electricity is produced from renewable energy sources. Alex Gorsky, Chairman and CEO, JNJ, stated, “While our company has been taking on the world’s biggest health challenges for over a century and we are proud of the incredible progress against the 2020 goals detailed in this year’s report, we know we must continue to invest in sustainable ways to bring life-enhancing healthcare products and solutions to everyone, everywhere.”
JNJ’s sales increased 10.7% year-over-year to $23.34 billion in its fiscal year 2021 third quarter. Its gross profit came in at $16.09 billion, up 14% year-over-year. Its non-GAAP net earnings were $3.67 billion, up 3.2% year-over-year. Also, its non-GAAP EPS came in at $2.60, up 18.2% year-over-year.
Analysts expect JNJ’s revenue and EPS to increase 14.1% and 22%, respectively, year-over-year to $94.24 billion and $9.80 in fiscal 2021. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 2.3% in price to close yesterday’s trading session at $163.52.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
JNJ has an A grade for Stability, and a B grade for Growth, Value, Sentiment, and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #1 of 200 stocks. Click here to see the additional POWR Ratings for Momentum for JNJ.
Bristol-Myers Squibb Company (BMY)
BMY in New York City develops, licenses, manufactures, and markets biopharmaceutical products worldwide. It offers products in hematology, oncology, cardiovascular, and immunology therapeutic classes. BMY has been setting sustainability objectives and reporting on results since the 1990s. Its total ESG risk score is 23.
On October 27, 2021, Giovanni Caforio, M.D., Board Chair and CEO of BMY, said, “Our teams advanced the product portfolio and achieved significant regulatory and clinical milestones, including for the fixed-dose combination of relatlimab and nivolumab. Our deep and diverse product pipeline, commercial execution, and financial flexibility provide a strong foundation that is enabling the company to bring new medicines that benefit patients with serious unmet needs, drive in-line product performance and deliver sustained growth.”
For its fiscal third quarter, ended September 30, 2021, BMY’s total revenues increased 10.3% year-over-year to $11.62 billion. The company’s net product sales also increased 10.3% from the same period last year to $11.24 billion. And its net earnings came in at $2.95 billion, up 58.4% year-over-year.
BMY’s revenue is expected to be $46.53 billion in its fiscal year 2021, representing a 9.4% year-over-year rise. The company’s EPS is expected to increase 16.6% year-over-year to $7.51 in the current year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. And over the past month, the stock has gained 1.8% in price to close yesterday’s trading session at $59.62.
It is no surprise that BMY has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Value, and a B grade for Growth and Quality.
AmerisourceBergen Corporation (ABC)
ABC sources and distributes pharmaceutical products in the United States and internationally. The Chesterbrook, Pa.-based company operates primarily through its Pharmaceutical Distribution segment. ABC recently moved toward a more user-friendly approach to Environmental, Social, Governance (ESG) reporting. Its total ESG risk score is 13.
On November 4, 2021, Steven H. Collis, Chairman, President & Chief Executive Officer of AmerisourceBergen, said, “I am proud of how we have lived our purpose with our customers, partners, and team members throughout these challenging times for our communities. Our long-term, sustainable growth is powered by our talent and culture, and we are guided by our purpose of being united in our responsibility to create healthier futures.”
ABC’s revenue increased 19.6% year-over-year to $58.91 billion for its fiscal fourth quarter, ended September 30, 2021. Its revenue from Pharmaceutical Distribution Services came in at $51.25 billion, up 8.4% year-over-year. The company’s operating income was $561.89 million, compared to a$6.11 billion loss in the year-ago period.
For its fiscal year 2022, analysts expect ABC’s revenue to be $237.09 billion, representing a 10.8% year-over-year rise. The company’s EPS is expected to increase 15.2% year-over-year to $10.67 in its fiscal 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 19.2% in price to close yesterday’s trading session at $124.42.
ABC’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Value, and a B grade for Growth, Stability, and Sentiment.
DENTSPLY SIRONA Inc. (XRAY)
York, Pa.-based XRAY designs, develops, manufactures, distributes, and sells various dental products & technologies primarily for the global professional dental market. It operates in two segments—Technologies & Equipment; and Consumables—supporting the UN’s SDGs by maintaining an alliance between its key sustainability priorities and goals. Its total ESG risk score is 20.
On September 23, 2021, XRAY announced its updated sustainability strategy with its inaugural sustainability report. Jorge M. Gomez, Chief Financial Officer, Dentsply Sirona and chair of the Dentsply Sirona Environmental, Social and Governance (ESG) Committee, said, “Sustainability is fundamental to our mission and vision. We strive to create long-term value for all our stakeholders by supporting our customers to provide world-class dental care while integrating sustainability and lifecycle thinking into everything we do.”
XRAY’s net sales increased 19.4% year-over-year to $1.07 billion in the third quarter, which ended September 30, 2021. Its gross profit came in at $591 million, up 33.7% year-over-year. Furthermore, its net income came in at $103 million, up 94.3% year-over-year. Its EPS was $0.47, up 88% year-over-year.
For its fiscal year 2021, XRAY’s revenue and EPS are expected to grow 28.6% and 62%, respectively, year-over-year to $4.3 billion and $2.9. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained nearly 7% in price to close yesterday’s trading session at $54.96.
XRAY’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, it has a B grade for Growth and Value. XRAY is ranked #9 of 173 stocks in the Medical – Devices & Equipment industry. Click here to see the additional POWR Ratings for XRAY (Momentum, Stability, Sentiment, and Quality).
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JNJ shares were trading at $163.73 per share on Tuesday morning, up $0.21 (+0.13%). Year-to-date, JNJ has gained 5.96%, versus a 26.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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