The Fed’s aggressive rate hikes to curb the stubbornly high inflation have plagued the economy for some time. But on the flip side, the medical industry, which thrived during the pandemic years, is envisioned to remain buoyed amid volatilities, thanks to rapid technological advancements, rising healthcare awareness among the population, and government support.
Over the past year, the Health Care Select Sector SPDR ETF (XLV) has gained 2.6%, outpacing the S&P 500, which lost 7.8%. In addition, the global healthcare services market is projected to grow at a 9% CAGR to reach $18.98 trillion by 2028.
In addition, government initiatives in support of the American population would be beneficial for millions to overcome the financial challenges in seeking healthcare solutions. Moreover, they should also bode well for the healthcare industry.
Furthermore, medical companies face an inelastic demand for their products and services despite challenges such as high inflation, snarled supply chain, and labor shortages. CNBC’s Jim Cramer believes that healthcare stocks have stayed relatively steady in 2022.
Against this backdrop, fundamentally sound medical stocks UnitedHealth Group Incorporated (UNH), Abbott Laboratories (ABT), and Nature’s Sunshine Products, Inc. (NATR) could be ideal buys now. However, given its weak fundamentals, SNDL Inc. (SNDL) might be avoided.
Stocks to Buy:
UnitedHealth Group Incorporated (UNH)
UNH is a diversified healthcare company. The company operates through four segments: Optum Health; OptumInsight; OptumRx; and UnitedHealthcare. It offers consumer-oriented health benefit plans and services, software and information products, health care coverage, and well-being services.
On January 23, 2023, Optum Rx, UNH’s pharmacy services company, launched Price Edge, a tool that seamlessly compares direct-to-consumer pricing for traditional generic drugs with insurance pricing to ensure members receive the lowest prescription drug price. This should benefit the company.
On November 16, 2022, UNH and Life Time Group Holdings, Inc. (LTH) announced an expansion of their relationship to include access to all Life Time locations. This is expected to help UNH deliver additional value to its customers, thereby driving appreciation of brand equity and market expansion.
The stock’s trailing-12-month EBITDA margin of 9.82% is 163.6% higher than the industry average of 3.73%. Its trailing-12-month ROCE is 26.26% compared to the industry average of negative 39.80%.
On November 4, UNH announced its quarterly dividend of $1.65 per share, which was payable to shareholders on December 13, 2022. This reflects the company’s ability to pay back its shareholders.
For the fiscal fourth quarter that ended December 31, 2022, UNH’s total revenues increased 12.3% year-over-year to $82.79 billion. In addition, adjusted net earnings attributable to UNH common shareholders came in at $5.06 billion and $5.34 per share, up 18.1% and 19.2% year-over-year, respectively.
Analysts expect UNH’s revenue for the fiscal first quarter ending March 2023 to come in at $89.76 billion, indicating a 12% year-over-year growth. Street expects the company’s EPS for the same quarter to grow 10.7% year-over-year to $6.07. The company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
UNH has gained 1.2% over the past month to close the last trading session at $495.35. It has gained 3.9% over the past five days.
UNH’s POWR Ratings reflect its fundamental strength. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UNH has a B grade for Growth, Stability, Sentiment, and Quality. In the A-rated 11-stock Medical – Health Insurance industry, it is ranked #2.
Beyond what has been stated above, we’ve also given UNH grades for Value and Momentum. Get all UNH ratings here.
Abbott Laboratories (ABT)
ABT discovers, develops, manufactures, and sells diversified healthcare products. The company operates through four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices.
On February 9, 2023, ABT and Cardiovascular Systems, Inc. (CSII), a medical device company, announced a definitive agreement for ABT to acquire CSII. After this acquisition, ABT is expected to gain an innovative, complementary solution in treating vascular disease through CSII’s leading atherectomy system.
On January 17, ABT announced that the U.S. Food and Drug Administration (FDA) had approved the company’s latest-generation transcatheter aortic valve implantation (TAVI) system, Navitor™, to treat people with severe aortic stenosis who are at high or extreme risk for open-heart surgery.
Michael Dale, senior vice president of ABT’s structural heart business, said, “Our Navitor valve builds upon our industry-leading portfolio of minimally invasive devices that surpass existing standards of care to address a range of heart diseases.”
On December 9, ABT declared a quarterly common dividend of 51 cents per share, indicating an increase of 8.5%, payable to shareholders on February 15, 2023. This marks ABT’s 51st consecutive year of dividend growth and the 396th consecutive quarterly dividend payment. This reflects the company’s cash generation abilities.
ABT’s trailing-12-month EBITDA margin of 27.58% is 640.2% higher than the 3.73% industry average. Its trailing-12-month gross profit margin of 56.53% is 2.2% higher than the 55.29% of the industry average.
For the fourth quarter that ended December 31, 2022, ABT’s net sales stood at $10.09 billion, whereas, for the fiscal year that ended December 31, 2022, it increased 1.3% year-over-year to $43.65 billion.
During the fourth quarter that ended December 31, 2022, the company’s operating earnings stood at $1.30 billion. Its net earnings came in at $1.03 billion, while earnings per common share came in at $1.03.
Analysts expect ABT to report revenue and EPS of $40.01 billion and $4.40 for the fiscal year ending December 2023, respectively. The company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Over the past three months, the stock has gained 4.3% to close the last trading session at $108.52. Moreover, it has also gained marginally intraday.
ABT’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
ABT has a B for Value, Stability, Sentiment, and Quality. It is ranked #8 of 147 stocks in the Medical – Devices & Equipment industry.
Click here to see ABT’s ratings for Growth and Momentum.
Nature’s Sunshine Products, Inc. (NATR)
Natural health and wellness company NATR primarily manufactures and sells nutritional and personal care products in Asia, Europe, North America, Latin America, and internationally.
On November 3, 2022, CEO Terrence Moorehead said, “We remain confident that we will navigate this unique period of volatility and uncertainty, bolstered by our strong balance sheet and team of experts on the ground.”
NATR’s forward EV/Sales of 0.34x is 80.4% lower than the industry average of 1.76x. Its forward Price/Sales of 0.42x is 64.5% lower than the industry average of 1.19x.
NATR’s trailing-12-month gross profit margin of 71.59% is 127% higher than the 31.53% industry average. Its trailing-12-month ROTA of 4.96% is 38% higher than the 3.60% industry average.
NATR’s net sales stood at $104.51 million for its fiscal third quarter that ended September 30, 2022. Its gross profit came in at $74.87 million. Its total current liabilities came in at $63.89 million for the period that ended September 30, 2022, compared to $76.67 million for the period that ended December 31, 2021.
NATR’s revenue is expected to rise marginally year-over-year to $420.60 million in the fiscal year ending December 2023. Its EPS is estimated to come in at $0.18 in the same period. The company surpassed the consensus revenue estimates in each of the trailing four quarters.
The stock has gained 13.5% over the past three months and rose marginally intraday to close the last trading session at $9.27.
NATR’s positive outlook is reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system.
NATR has an A grade for Value and Quality and a B for Stability and Sentiment. In the B-rated Medical – Consumer Goods industry, it is ranked first out of the nine stocks.
Click here for the additional POWR Ratings for NATR (Growth and Momentum).
Stock to Avoid:
SNDL Inc. (SNDL)
SNDL, headquartered in Calgary, Canada, engages in the production, distribution, and sale of cannabis products, operating through the Cannabis Operations and Retail Operations segments. It engages in the cultivation, distribution, and sale of cannabis for the adult-use markets and private sale of recreational cannabis through corporate-owned and franchised retail cannabis stores.
SNDL’s trailing-12-month gross profit margin of 19.07% is 65.5% lower than the 55.29% industry average. Its trailing-12-month net income margin of negative 54.54% compares to the negative 5.84% industry average.
SNDL’s net loss for the fiscal third quarter that ended September 30, 2022, stood at CAD98.84 million ($74.04 million) compared to the net earnings of CAD16.71 million ($12.51 million) in the prior-year quarter. Its loss from operations expanded 365% year-over-year to CAD88.54 million ($66.32 million).
SNDL’s current asset declined to CAD526.03 million ($394.01 million) for the period that ended September 30, 2022, compared to CAD728.18 million ($545.42 million) for the period that ended December 31, 2021.
Analysts expect SNDL’s EPS to be negative $0.06 in the fiscal year ending December 2023. The consensus revenue estimate is expected to come in at $746.59 million. The company missed Street EPS estimates in each of the trailing four quarters.
Over the past month, the stock has plunged 10.6% to close the last trading session at $2.03. Moreover, it has declined 10.4% over the past five days.
It is no surprise that SNDL has an overall rating of D, which equates to Sell in our POWR Ratings system.
The stock has an F grade for Momentum and Stability and a D for Quality and Sentiment. Of the 172 stocks in the D-rated Medical – Pharmaceuticals industry, SNDL is ranked #139.
Beyond what we’ve stated above, click here to see additional SNDL ratings for Growth and Value.
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UNH shares were unchanged in premarket trading Tuesday. Year-to-date, UNH has declined -6.57%, versus a 7.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors. More...
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|Ticker||POWR Rating||Industry Rank||Rank in Industry|
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|ABT||Get Rating||Get Rating||Get Rating|
|NATR||Get Rating||Get Rating||Get Rating|
|SNDL||Get Rating||Get Rating||Get Rating|