The healthcare sector went through a difficult time amid the COVID-19 pandemic as it stretched its resources to the max in its efforts to control the pandemic. Now, with increasing numbers of the U.S. population approaching retirement, and thus qualifying for Medicare, healthcare spending by federal and state governments is projected to increase going forward.
Investors’ interest in healthcare stocks is evidenced by Health Care Select Sector SPDR Fund’s (XLV) 5.4% gains over the past month.
Also, as patients resume scheduling healthcare visits for non-COVID-19 treatments and elective surgeries, many healthcare companies are expected to see solid growth in the near term. UnitedHealth Group Incorporated (UNH) and Community Health Systems, Inc. (CYH) have recently been upgraded by analysts. So, we think it could be wise to bet on them now to capitalize on the industry’s tailwinds.
UnitedHealth Group Incorporated (UNH)
Health and well-being company UNH operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. The operates through two business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum. Argus recently upgraded the stock’s rating to ‘Buy’ form ‘Hold’.
UNH’s revenue increased 89.6% year-over-year to $70.20 billion for the first quarter ended March 31, 2021. The company’s net income came in $4.90 billion, which represents a 43.8% year-over-year increase. Its EPS was $5.08, up 44.3% year-over-year.
Analysts expect UNH’s EPS to increase 26.8% year-over-year to $4.45 for the quarter ending September 30, 2021. It surpassed consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to be $281.63 billion in its fiscal year 2021, which represents an 9.5% year-over-year rise.
The state of Hawaii selected UNH’s Community Plan of Hawaii to administer its QUEST Integration Medicaid program statewide, which includes the islands of Hawaii, Kauai, Lanai, Maui, Molokai, and Oahu, effective July 1.This helps expand the company’s market reach. The stock has gained 42.7% over the past year and closed yesterday’s trading session at $405.90.
UNH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Sentiment, and a B grade for Stability, Value, and Quality. Click here to access UNH’s ratings for Momentum and Growth as well.
UNH is ranked #2 of 11 stocks in the B-rated Medical- Health insurance industry.
Community Health Systems, Inc. (CYH)
CYH is an operator of general acute care hospitals and outpatient facilities in communities across the country. The company operates through its hospital operations segment, which includes its general acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services. Analysts at Credit Suisse Group recently upgraded CYH’s rating to ‘Neutral’ from ‘Underperform’.
For its fiscal year 2021 first quarter, ended March 31, 2021, the company’s adjusted EBITDA increased 60.2% year-over-year to $495 million. Its non-GAAP EPS was $0.36 compared to a $1.59 loss per share in the prior-year period. Its income from operations increased 196.4% year-over-year to $326 million.
Analysts expect CYH’s EPS to come in at $0.76 in its fiscal year 2022, which represents an 204% year-over-year increase. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 4.9% year-over-year to $3.04 billion for the quarter ending September 30, 2021.
The company announced on May 4 that its wholly owned subsidiary, CHS/Community Health Systems, Inc. intends to offer $1.44 billion in Junior-Priority Secured Notes due 2030 and use the net proceeds to redeem all its outstanding 8.125% Junior-Priority Secured Notes due 2024. The stock has gained 325.7% over the past year and closed yesterday’s trading session at $11.92.
CYH’s POWR Ratings reflect this promising outlook. The stock has a B grade for Value. Click here to see the additional POWR Ratings for CYH (Quality, Growth, Sentiment, Momentum, and Stability).
CYH is ranked #8 of 11 stocks in the A-rated Medical – Hospitals industry.
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UNH shares were trading at $412.09 per share on Tuesday afternoon, up $6.19 (+1.53%). Year-to-date, UNH has gained 17.93%, versus a 10.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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