There is widespread uncertainty in the markets due to fading stimulus hopes ahead of the November 3 presidential election and rising coronavirus cases in several parts of the country. The stalemate in negotiations for the next stimulus package will delay an economic recovery. However, corporate earnings for the third quarter have been resilient so far.
Defensive stocks with good fundamentals may prove to be good investments going into November. Healthcare and industrials are also expected to see pent-up demand in the coming quarters.
UnitedHealth Group (UNH), Abbott Laboratories (ABT), Caterpillar, Inc. (CAT), Zoetis, Inc. (ZTS) have managed to deliver decent gains despite the market witnessing widespread uncertainty. In addition to having a solid portfolio of essential products, the companies are also constantly innovating and launching new products to drive further growth.
UnitedHealth Group (UNH)
UNH operates as a health and well-being company. The company runs the Optum and UnitedHealthcare online platforms. UNH’s stock has gained 9.9% so far this year.
The company has recently acquired Divvydose, which is an online pharmacy startup. UNH also plans to introduce its Medicare Advantage healthcare plan in approximately 300 counties by next year.
For the third quarter ended September 2020, Optum saw a growth in revenue of 21% year-over-year. UNH’s total revenue increased by 7.9% year-over-year to $65.11 billion. EPS for the quarter came in at $3.51, beating the consensus estimate by 13.6%. UNH is expected to witness revenue growth of 7.1% for the quarter ending December 2020, and 8.7% in 2021. The company’s EPS is estimated to grow by 10.9% in 2021 and at a rate of 12.7% per annum over the next five years.
How does UNH stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Industry Rank
A for Overall POWR Rating
The stock is also ranked #1 out of 9 stocks in the Medical – Health Insurance industry.
Abbott Laboratories (ABT)
ABT manufactures and markets healthcare products globally. The company’s operations include marketing diagnostic products, established pharmaceuticals, vascular products, and nutritional products. ABT’s stock has gained 25.5% so far this year.
The company has sold more than 100 million coronavirus testing kits since the start of the pandemic. After receiving approval from the FDA, ABT has started to market the FreeStyle Libre 2 which is an integrated continuous glucose monitor (iCGM) for patients suffering from diabetes. The company has also started marketing its Libre Sense Glucose Sport Biosensor which is the first glucose sensor for athletes.
During the third quarter ended September 2020, the company reported an increase in organic sales of 10.6%, compared to the same period last year. The sales of the diagnostics-related products offered by the company rose 39% while that of FreeStyle Libre rose 36%.
ABT is expected to witness revenue growth of 15.4% for the quarter ending December 2020, and 13.3% in 2021. The company’s EPS is estimated to grow 25.9% in 2021 and at a rate of 14.9% per annum over the next five years.
It’s no surprise that ABT is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. In the 240-stock Medical – Pharmaceuticals industry, it is ranked #2.
Caterpillar, Inc. (CAT)
CAT is a manufacturer and marketer of industrial equipment including construction and mining equipment, industrial gas turbines, and diesel-electric locomotives. The company also provides financing along with related services. CAT’s stock has gained 10.5% so far this year.
The company has agreed to acquire the Oil & Gas division of Weir Group. This division produces flow iron, consumable parts, a complete line of pumps, wellhead and pressure control products, and so on. The company has also released a slew of new products such as the Next Generation Cat 785 Mining Truck, the Cat Durilock Shroud System, Cat D9 Dozer, and so on.
During the second quarter ended June 2020, the company saw revenues of $10 billion. The profit per share of the company stood at $0.84. CAT is expected to witness revenue growth of 7.6% in 2021. The company’s EPS is estimated to grow by 39.7% in 2021.
It’s no surprise that CAT is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. In the 60-stock Industrial – Machinery industry, it is ranked #3.
Zoetis, Inc. (ZTS)
ZTS primarily develops, manufactures, and markets medicines and veterinary vaccines. Additionally, the company also focuses on diagnostic products, genetic tests, along with a wide range of other services. ZTS’s stock has gained 21.3% so far this year.
The company has recently launched the Vetscan Imagyst, which is a diagnostic platform that can help detect intestinal parasites in pets. The company has also acquired Virtual Recall, which is a veterinary engagement software company.
During the second quarter, the company witnessed a growth in operating revenue of 4% compared to the same period last year. The company’s adjusted net income also grew by 4% during the same period.
ZTS is expected to witness revenue growth of 2.7% for the fiscal quarter ending December 2020, and 8.1% in 2021. The company’s EPS is estimated to grow 14.9% in 2021 and at a rate of 9.3% per annum over the next five years.
ZTS’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. In the 240-stock Medical – Pharmaceuticals industry, it is ranked #4.
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UNH shares were trading at $320.27 per share on Tuesday afternoon, down $2.79 (-0.86%). Year-to-date, UNH has gained 10.34%, versus a 6.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...
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