The soaring inflation and the Fed’s rate hike have led to significant market volatility this year. Additionally, traders believe there is a more than 95% possibility of another 75-bps rate hike in November. Amid the uncertainties, healthcare stocks could help hedge some market risks due to the nearly inelastic demand for healthcare products and services.
The healthcare industry is expected to thrive in the coming years. Moreover, fast digital change in the healthcare delivery model, as well as the expansion of virtual health services such as telehealth and telemedicine, could contribute significantly to the industry’s growth.
According to Statista, healthcare spending in the United States is predicted to reach $6.20 trillion by 2028. Furthermore, the global smart healthcare industry is predicted to develop at a CAGR of 13.3% from 2022 to 2030.
Given this backdrop, fundamentally sound healthcare stocks Pfizer Inc. (PFE) and Humana Inc. (HUM) could be good investments.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. The company serves wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, individual provider offices, and disease control and prevention centers.
On October 12, 2022, PFE’s co-developed vaccine with BioNTech (BNTX), the 10-µg booster dose of Omicron BA.4/BA.5-adapted bivalent COVID-19 vaccine for children, received Emergency Use Authorization from the U.S. Food and Drug Administration. This is expected to add to the revenues of both companies.
PFE’s total revenues came in at $27.74 billion for the second quarter that ended July 31, 2022, up 46.8% year-over-year. Its net income came in at $9.91 billion, up 78.1% year-over-year, while its EPS came in at $1.73, up 76.5% year-over-year.
Analysts expect PFE’s revenue to increase 43.2% year-over-year to $1.11 trillion in 2022. Its EPS is estimated to grow 70.8% year-over-year to $71.79 in 2022. It has surpassed EPS estimates in three of four trailing quarters. Over the year, the stock has gained 5.5% to close the last trading session at $45.54.
PFE’s POWR Ratings reflect this promising outlook. The company has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PFE has an A grade for Value and a B for Quality. Within the 161-stock Medical - Pharmaceuticals industry, it is ranked #10.
Click here to see the additional POWR Ratings for Momentum, Growth, Stability, and Sentiment for PFE.
Humana Inc. (HUM)
HUM and its subsidiaries operate as a health and well-being company in the United States. It operates through three segments: Retail; Group and Specialty; and Healthcare Services.
On October 12, 2022, HUM and USAA Life Insurance Company introduced a new Medicare Advantage plan intended for veterans to give a strong coverage choice that supplements Veterans Affairs healthcare benefits. This plan could expand the company’s portfolio and increase its consumer base.
HUM’s total revenues came in at $23.66 billion for the second quarter that ended June 30, 2022, up 14.6% year-over-year. Its net income came in at $696 million, up 18.4% year-over-year. Moreover, its EPS came in at $5.48, up 20.4% year-over-year.
HUM’s revenue is expected to increase 11.5% year-over-year to $93.03 billion in 2022. Its EPS is estimated to grow 21.3% year-over-year to $25.03 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 37.7% to close the last trading session at $521.94.
HUM’s overall B rating equates to a Buy in our POWR Ratings system. It has a B grade for Value and Sentiment. It is ranked #6 out of 11 stocks in the A-rated Medical - Health Insurance industry.
To see the additional POWR Ratings for Growth, Stability, Momentum, Value, and Quality for HUM, click here.
PFE shares were trading at $45.66 per share on Tuesday afternoon, up $0.12 (+0.26%). Year-to-date, PFE has declined -20.84%, versus a -18.30% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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