With the rising prevalence of chronic diseases, growing healthcare costs and charges are increasing demands for healthcare insurance proliferating growth prospects for the industry. Also, new technologies like AI offers personalized and customizable services, creating new avenues for the market.
Given the industry’s bright prospects, fundamentally sound healthcare stocks UnitedHealth Group Incorporated (UNH), Centene Corporation (CNC), and The Cigna Group (CI) for defensive investing.
According to recently released projections by Centers for Medicare & Medicaid Services' (CMS), National Health Expenditures (NHE) are expected to exceed $5 trillion in 2024, and are projected to reach $7.70 trillion by 2032. And the U.S. pharmaceutical market is expected to grow at a CAGR of 5.5% until 2030.
Also, with the growing awareness among individuals, the health insurance market worldwide is projected to reach $2.38 trillion in 2024, with average per capita spending expected to be $306.70 in 2024.
High healthcare costs, rising incidences of chronic diseases and innovative technologies are propelling the US health and medical insurance market. The market size is anticipated to hit $2.01 trillion by 2029, exhibiting growth at a CAGR of more than 6%.
Besides, Artificial Intelligence (AI) is helping health insurers to gather, analyze, and utilize large volumes of healthcare data creating wide opportunities. Also, this data analysis helps insurers in developing more personalized healthcare services and products for customers and meet their specific requirements efficiently.
Considering the encouraging market trends, let’s delve into the fundamentals of the top three Medical – Health Insurance stocks, beginning with the third choice.
Stock #3: UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified health care company. The company operates in four segments: UnitedHealthcare; Optum Health; Optum Insight; and Optum Rx. The company offers consumer-oriented health benefit plans and services for national employers, public sector employers, mid-sized employers, small businesses, and individuals.
In terms of forward Price/Sales, UNH is trading at 1.18x, 69.3% lower than the industry average of 3.84x. Further, the stock’s forward Price/Book multiple of 4.75 is 64.7% lower than the industry average of 2.88. Likewise, its forward EV/EBIT of 14.99x is 8.1% lower than the industry average of 16.31x.
UNH’s trailing-12-month EBITDA margin of 9.22% is 53% higher than the respective industry average of 6.03%. Likewise, the stock’s trailing-12-month asset turnover ratio of 1.34x is 232.2% higher than the industry average of 0.40x.
For the first quarter that ended March 31, 2024, UNH’s total revenues increased 8.6% year-over-year to $99.80 billion. The company’s adjusted net earnings attributable to UNH common shareholders came in at $6.43 billion and $6.91 per share, up 8.9% and 10.4% from the prior year’s quarter, respectively.
Furthermore, the company’s cash and cash equivalents at the end of the period came in at $28.41 billion.
Analysts expect UNH’s revenue and EPS for the second quarter (ended June 2024) to increase 6.4% and 8.2% year-over-year to $98.81 billion and $6.65, respectively. Further, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past month, UNH’s stock has gained 5.6% and 13.2% over the past year to close the last trading session at $517.80.
UNH’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Stability. Within the A-rated Medical – Health Insurance industry, UNH is ranked #5 out of 10 stocks.
Click here to access additional ratings of UNH (Value, Sentiment, Growth, Quality, and Momentum).
Stock #2: Centene Corporation (CNC)
CNC is a healthcare enterprise providing programs and services to under-insured and uninsured families, commercial organizations, and military families. The company operates through Medicaid; Medicare; Commercial; and Other segments.
In terms of forward EV/EBITDA, CNC is trading at 8.04x, 39.7% lower than the industry average of 13.34x. Likewise, the stock’s forward Price/Book multiple of 1.33 is 53.9% lower than the industry average of 2.88. Similarly, its forward EV/EBIT of 9.78x is 40% lower than the industry average of 16.31x.
In terms of the trailing-12-month EBIT margin, CNC’s 3.40% is 78.4% higher than the 1.91% industry average. Likewise, its trailing-12-month asset turnover ratio of 1.72x is 328.6% higher than the 0.40x industry average.
CNC’s total revenues increased 3.9% year-over-year to $40.41 billion in the first quarter that ended March 31, 2024. Its adjusted net earnings and EPS came in at $1.22 billion and $2.26, indicating increases of 4.1% and 7.11% from the year-ago value, respectively.
In addition, the company’s total cash, cash equivalents and restricted cash and cash equivalents totaled $17.88 billion as of March 31, 2024, compared to $16.17 billion as of March 31, 2023.
Analysts expect CNC’s revenue for the fiscal year (ending December 2025) to increase 3.6% year-over-year to $155.04 billion, and its EPS is expected to grow 11% year-over-year to $7.60 for the same year. Furthermore, the company topped the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has surged 4.4% over the past year to close the last trading session at $66.63.
CNC’s POWR Ratings reflect its bright prospects. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
CNC has a B grade for Quality, Value, and Stability. It is ranked #3 among 10 stocks within the A-rated Medical – Health Insurance industry.
To see the other ratings of CNC for Sentiment, Growth, and Momentum, click here.
Stock #1: The Cigna Group (CI)
CI offers insurance and related products and services. The company operates through Evernorth Health Services segment; and Cigna Healthcare segment. It provides a range of coordinated and point solution health services and care delivery and management solutions to health plans.
In terms of forward non-GAAP P/E, CI is trading at 11.74x, 40.1% lower than the industry average of 19.61x. Likewise, the stock’s forward EV/Sales multiple of 0.51 is lower than the industry average of 3.59. Also, its forward Price/Cash Flow of 9.59x is 39.7% lower than the industry average of 15.91x.
CI’s trailing-12-month EBIT margin of 3.63% is 90.5% higher than the respective industry average of 1.91%. Likewise, the stock’s trailing-12-month levered FCF margin of 1.53% is 15.1% higher than the industry average of 1.33%.
On April 25, CI’s Board of Directors declared a cash dividend of $1.40 per share of its common stock, paid on June 20, 2024 to shareholders of record as of the close of business on June 4, 2024.
CI pays an annual dividend of $5.60, which translates to a yield of 1.67% at the current share price. Its four-year average dividend yield is 1.22%. Moreover, the company’s dividend payouts have increased at a CAGR of 165.3% over the past five years.
During the first quarter that ended on March 31, 2024, CI’s adjusted revenues increased 23.2% year-over-year to $57.25 billion. The company’s adjusted income from operations of $1.87 billion and $6.47 per share, reflects increases of 15.9% and 19.6% year-over-year, respectively.
As per the full year 2024 outlook, CI expects adjusted revenues of at least $235 billion and adjusted income from operations at least $8.06 billion and $28.40 per share.
Street expects CI’s EPS for the second quarter (ended June 2024) to increase 5.2% year-over-year to $6.45. Its revenue is expected to grow 20% year-over-year to $58.35 billion for the same quarter. Furthermore, the company has surpassed the consensus revenue and EPS estimates in all trailing four quarters.
Shares of CI have gained 7.7% over the past six months and 23.1% over the past year to close the last trading session at $330.70.
CI’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
CI has a B grade for Quality, Value, Stability, and Sentiment. It has topped among 10 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have CI’s ratings for Momentum, and Growth. Get all CI ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
UNH shares were trading at $517.43 per share on Monday afternoon, up $5.90 (+1.15%). Year-to-date, UNH has declined -0.91%, versus a 18.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 Healthcare Stocks for Defensive Investing StockNews.com
