The growing number of elderly people worldwide is fueling a surge in demand for healthcare services, pharmaceuticals, and insurance, giving the healthcare sector a significant tailwind. Additionally, with technological advancements and innovative treatments on the rise, the future of the industry looks brighter than ever.

Amid this backdrop, investors looking to invest in the healthcare sector could keep an eye on fundamentally strong companies like Eli Lilly and Company (LLY), UnitedHealth Group Incorporated (UNH), and Merck & Co., Inc. (MRK), which are well-positioned to capitalize on this demographic shift.

According to a report, one in five Americans will be 65 or older by 2040, reaching a total of 80 million. As the global population ages, the need for biopharma products and modern, effective drugs to manage long-term diseases is poised to increase more than ever. The pharmaceuticals market is forecasted to generate $1.45 trillion in revenue by 2029, exhibiting a CAGR of 4.7%.

Additionally, the health insurance sector, particularly those offering Medicare-related products and services, is poised to capitalize on this trend. As per Precedence Research, the global health insurance market is anticipated to hit $5.12 trillion by 2034, growing at a CAGR of 7.4%.

Considering these conducive trends, let’s look at the fundamentals of the above-mentioned stocks in detail:

Eli Lilly and Company (LLY)

LLY is a medicine company that discovers, develops, manufactures, and markets human pharmaceuticals worldwide. The company offers medicines for diabetes, obesity, rheumatoid arthritis, plaque psoriasis, ulcerative colitis, depressive disorder, and others, in addition to oncology products.

On September 24, LLY announced that the Ministry of Health, Labour and Welfare of Japan approved Kisunla for treating adults with early symptomatic Alzheimer’s disease (AD), which includes people with mild cognitive impairment (MCI) and those with mild dementia stage of AD. This treatment will help reduce the infusion burden for eligible patients.  

On September 13, LLY received approval from the U.S. Food and Drug Administration (FDA) for EBGLYSS (lebrikizumab-lbkz), a targeted IL-13 inhibitor. This biologic treatment is intended for adults and children aged 12 years and above with moderate-to-severe atopic dermatitis that is not well controlled with topical therapies. It aims to provide long-lasting efficacy to patients with a maintenance dose administered once a month for a year.

For the second quarter (ended June 30, 2024), LLY reported revenue of $11.30 billion, representing a 36% growth from the prior-year quarter. It reported a non-GAAP gross profit of $9.27 billion, indicating a 39.8% growth from the prior year quarter with a margin of 80.8% (up 250 bps year-over-year).

In addition, its operating income increased 74.8% year-over-year to $3.71 billion. The company’s non-GAAP net income came in at $3.54 billion and $3.92 per share, up 85.9% and 85.8% year-over-year, respectively.

The company has updated its fiscal year 2024 guidance, increasing its revenue projection by $3 billion to a range of $45.40 billion to $46.60 billion. LLY’s EPS is anticipated to fall between $15.10 and $15.60. On a consolidated adjusted basis, its non-GAAP EPS is expected to range from $16.10 to $16.60.

Street expects LLY’s revenue for the fiscal third quarter (ending September 2024) to increase 26.5% year-over-year to $12.01 billion. Its EPS for the current quarter is expected to improve substantially from the year-ago value to $4.50. Moreover, it beat the EPS estimates in each of the trailing four quarters, which is promising.

Shares of LLY have surged 65.3% over the past year and 59.3% over the past nine months to close the last trading session at $909.32.

LLY’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

LLY has an A grade for Sentiment and a B for Growth. It is ranked #37 out of 157 stocks in the Medical – Pharmaceuticals industry. Click here to see the additional ratings for LLY (Value, Momentum, Stability, and Quality).

UnitedHealth Group Incorporated (UNH)

UNH operates as a diversified health care company. The company operates through four segments: UnitedHealthcare; Optum Health; Optum Insight; and Optum Rx.

On September 17, the UNH Community Plan of New Mexico announced a collaboration with the school-based healthcare provider Goodside Health to provide and expand integrated physical and behavioral healthcare services to 50 New Mexico schools, with an investment of $250,000. This collaboration will help school children gain healthier access to primary care as well as mental health care.

On August 29, UNH announced a three-year strategic partnership with Goodwill Industries International, involving a $4.5 million investment, to increase access to education and training, support health-related social needs, and create workforce development opportunities. This partnership aims to help people overcome barriers that prevent them from obtaining employment and to create opportunities for job seekers.

In the fiscal second quarter that ended on June 30, 2024, UNH’s total revenue increased 6.4% year-over-year to $98.86 billion. The company’s adjusted net earnings came in at $6.31 billion, up 9.3% year-over-year, while its adjusted EPS grew 10.7% from the year-ago value to $6.80.

According to the financial guidance for fiscal year 2024, the company’s adjusted earnings per share is anticipated to range from $27.50 to $28.

The consensus revenue estimate of $99.28 billion for the fiscal third quarter (ending September 2024) represents a 7.5% increase year-over-year. The consensus EPS estimate of $7.06 for the same quarter indicates a 7.6% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

The stock has surged 18.8% over the past three months to close the last trading session at $574.81.

UNH’s mixed fundamentals are reflected in its POWR Ratings. The stock has a B grade for Stability and Sentiment. It is ranked #5 out of 10 stocks in the A-rated Medical – Health Insurance industry.

Beyond what is stated above, we’ve also rated UNH for Growth, Value, Momentum, and Quality. Get all UNH’s ratings here.

Merck & Co., Inc. (MRK)

MRK is a global health care company offering health solutions through its prescription medicines, including biological therapies, vaccines, and animal health products. It operates through two segments: Pharmaceutical and Animal Health.

On September 25, MRK received new approval from the Japanese Ministry of Health, Labor and Welfare (MHLW) for KEYTRUDA’s significant role as a combination therapy and as a monotherapy for certain patients with urothelial carcinoma.

On September 18, MRK announced that the U.S. Food and Drug Administration (FDA) approved KEYTRUDA in combination with pemetrexed and platinum chemotherapy as a first-line treatment option for adult patients with unresectable advanced or metastatic malignant pleural mesothelioma (MPM).

MRK’s sales for the second quarter ended June 30, 2024, increased 7.2% year-over-year to $16.11 billion, while its KEYTRUDA product sales improved by 15.9% from the year-ago value to $7.27 billion. The company’s non-GAAP net income stood at $5.81 billion compared to the prior-year quarter’s loss of $5.22 billion, while its non-GAAP EPS came in at $2.28 versus a loss of $2.06 per share last year.

According to the full-year 2024 guidance, MRK forecasts worldwide sales to range from $63.40 billion to $64.40 billion, an increase from the previous guidance of $63.10 billion to $64.30 billion. The company also expects non-GAAP EPS to be between $7.94 and $8.04.

Analysts expect MRK’s revenue for the fourth quarter (ending December 2024) to increase 7.1% year-over-year to $15.67 billion, while its EPS for the same period is expected to grow significantly from the prior year to $1.91. Moreover, the company topped the consensus revenue estimates in each of the trailing four quarters.

Over the past year, the stock has gained 7.3%, closing the last trading session at $113.09.

MRK’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

It also has an A grade for Quality and a B for Value and Stability. Within the Medical – Pharmaceuticals industry, it is ranked #7 out of 157 stocks. Click here to see MRK’s ratings for Growth, Momentum, and Sentiment.

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

LLY shares were trading at $884.11 per share on Friday morning, down $25.21 (-2.77%). Year-to-date, LLY has gained 52.41%, versus a 21.84% 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...

More Resources for the Stocks in this Article