The rising global elderly population is driving increased demand for healthcare services, medications, and insurance, providing strong momentum for the healthcare sector. Coupled with rapid advancements in technology and new treatment innovations, the industry’s outlook is more promising than ever.

Given this backdrop, it could be wise to consider investing in fundamentally sound healthcare companies like UnitedHealth Group Incorporated (UNH), AbbVie Inc. (ABBV), and Merck & Co., Inc. (MRK), which are well-positioned to capitalize on this demographic shift.

A report projects that by 2040, one in five Americans—totaling 80 million people—will be 65 or older. As the global population ages, the demand for biopharma products and advanced drugs to manage chronic diseases is set to grow significantly. The pharmaceuticals market is forecasted to generate $1.45 trillion in revenue by 2029, exhibiting a CAGR of 4.7%.

The health insurance market is expected to proliferate due to an aging population, increasing chronic diseases, and greater awareness of the financial benefits of health coverage. 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 analyze the fundamentals of the three healthcare picks mentioned above.

UnitedHealth Group Incorporated (UNH)

UNH operates as a diversified healthcare company in the United States. The company operates through four segments: UnitedHealthcare, Optum Health, Optum Insight, and OptumRx.

On August 29, UNH and Goodwill Industries announced a partnership with a $4.5 million investment over three years to expand job training, health services, and workforce opportunities across 25 states, aiming to support access to better employment.

During the third quarter that ended September 30, 2024, UNH’s total revenues increased 9.2% year-over-year to $100.82 billion. The company’s earnings from operations came in at $8.71 billion, up 2.1% from the year-ago value. Moreover, its adjusted net earnings attributable to UNH common shareholders came in at $6.65 billion and $7.15 per share, up 8.4% and 9% from the previous year’s quarter, respectively.

Street expects UNH’s EPS and revenue for the quarter ending December 31, 2024, to increase 9.8% and 7.8% year-over-year to $6.76 and $101.79 billion, respectively. It surpassed Street EPS and revenue estimates in each of the trailing four quarters, which is remarkable.

Over the past year, the stock has gained 6.8% to close the last trading session at $565.79. It soared 7.6% year-to-date.

UNH’s POWR Ratings reflect strong prospects. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

It has a B grade for Stability and Quality. It is ranked #5 out of 10 stocks in the A-rated Medical – Health Insurance industry.

Click here to see UNH’s ratings for Growth, Value, Momentum, and Sentiment.

AbbVie Inc. (ABBV)

ABBV is a global diversified research-based biopharmaceutical company engaged in manufacturing and selling medications and therapies. It offers a comprehensive product portfolio across Immunology, Oncology, Neuroscience, Eye Care, Aesthetics, and Other Specialties.

On October 29, ABBV announced that Ontario would list VRAYLAR® (cariprazine) as a General Benefit on its formulary starting October 31, 2024. This aims to improve access to mental health medication in Canada, where public coverage is crucial, as many individuals with serious mental illness face unemployment. VRAYLAR is already covered in Québec and by several federal programs for treating schizophrenia.

On October 28, the company would acquire Aliada Therapeutics, a biotech company developing blood-brain barrier-crossing technology to treat CNS diseases. Aliada’s lead asset, ALIA-1758, is an antibody targeting Alzheimer’s disease.

For the six-month period that ended on June 30, 2024, ABBV’s net revenue increased 2.6% year-over-year to $26.77 billion, while the company’s Neuroscience segment reported net revenue of $4.13 billion, indicating a 15.3% growth from the prior-year period. Its attributable net income came in at $2.74 billion, up 21% year-over-year, while its earnings per share attributable grew 21.4% from the year-ago value to $1.53.

ABBV raised its adjusted EPS guidance to range between $10.71 and $10.91 from the prior forecast of $10.61 and $10.81.

Analysts expect ABBV’s revenue and EPS for the fiscal fourth quarter (ending December 2024) to increase 2.6% and 5.5% year-over-year to $14.68 billion and $2.94, respectively. Moreover, it beat the revenue estimates in each of the trailing four quarters.

The stock climbed 22.3% year-to-date and 22.32% over the past year, to close the last trading session at $189.26.

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

ABBV has a B grade for Growth, Value, Sentiment, Stability, and Quality. It is ranked #2 out of 163 stocks in the Medical – Pharmaceuticals industry.

In addition to the POWR Ratings we’ve stated above, we also have ABBV ratings for Momentum. Get all ABBV ratings here.

Merck & Co., Inc. (MRK)

MRK operates as a healthcare company worldwide. It operates through two segments: Pharmaceutical and Animal Health. The company’s offerings include global healthcare solutions in human health pharmaceuticals (oncology, immunology) and preventive vaccines. The Animal Health segment provides veterinary pharmaceuticals, vaccines, and digital health products.

On October 28, MRK announced that it and Moderna, Inc. (MRNA) had initiated a Phase 3 trial, INTerpath-009, to evaluate V940 (mRNA-4157) combined with KEYTRUDA® as an adjuvant treatment for resectable Stage II or III non-small cell lung cancer patients who did not achieve a complete response with prior therapies.

MRK’s total sales rose 7.2% year-over-year to $16.11 billion for the second quarter that ended June 30, 2024. MRK’s KEYTRUDA sales increased 15.9% year-over-year to $7.27 billion. Similarly, the company’s non-GAAP net income and non-GAAP EPS were $5.81 billion and $2.28, compared to a non-GAAP net loss of $5.22 billion and $2.06 per share in the same quarter of the prior year, respectively.

Street expects MRK’s revenue for the fourth quarter ending December 31, 2024, to increase 7.3% year-over-year to $15.70 billion. Its EPS for the same quarter is expected to grow considerably year-over-year to $1.91. It surpassed the Street EPS estimates in three of the trailing four quarters.

Shares of MRK have gained 0.6% over the past year, closing the last trading session at $104.20.

MRK’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

MRK has an A grade for Quality and a B for Value and Stability. It is ranked #12 in the Medical – Pharmaceuticals industry.

To access additional ratings of MRK for Growth, Momentum, and Sentiment, click here.

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UNH shares were trading at $562.07 per share on Tuesday afternoon, down $3.17 (-0.56%). Year-to-date, UNH has gained 8.02%, versus a 23.62% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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