Healthcare services are necessities, not luxuries, meaning demand is consistent regardless of economic conditions. People need medical care, pharmaceuticals, and health-related services regardless of the economic climate, making it a recession-resistant sector.
Given this backdrop, it could be wise to consider investing in fundamentally strong healthcare stocks, Johnson & Johnson (JNJ), AbbVie Inc. (ABBV), and Thermo Fisher Scientific Inc. (TMO).
The demand for healthcare services and products is growing, driven by factors like a global aging population, escalating healthcare expenses, and ongoing advancements in medical technology. Therefore, global pharmaceuticals market revenue is anticipated to increase at a CAGR of 4.7%, reaching $1.45 trillion by 2029.
The United States leads the world in per capita prescription drug spending, accounting for 30-40% of the global market and 45% of global pharmaceutical sales, with 22% of global production. As a result, companies producing or providing these specialized drug solutions are experiencing consistent growth.
Diagnostics also plays a crucial role, which is why the global clinical diagnostics market size is worth $86.72 billion in 2024 and is projected to reach around $140.53 billion by 2033, expanding at a CAGR of 5.5% between the two periods.
Given these favorable industry trends, let’s look at the fundamentals of three healthcare stocks.
Johnson & Johnson (JNJ)
JNJ is engaged in researching, developing, manufacturing, and selling healthcare products primarily focused on human health and well-being. The company offers a diversified range of products through the Innovative Medicine and MedTech segments.
On September 30, 2024, JNJ announced it had expanded the roll-out of its latest advancement in presbyopia-correcting intraocular lenses (PC - IOL), TECNIS Odyssey, in the United States. The new full visual range IOL*1 offers patients an unmatched continuous full range of vision, so they can see clearly from far to near and between, minimizing their need for glasses.
On August 20, JNJ announced its acquisition of V-Wave Ltd., a privately held company specializing in innovative heart failure treatment. The deal includes an upfront payment of $60 million, with the potential for additional payments of up to $1.1 billion. This acquisition is set to enhance JNJ MedTech’s position in the cardiovascular space, broadening its portfolio of advanced heart failure treatment options.
For the second quarter of 2024, which ended on June 30, JNJ’s sales to customers increased 4.3% year-over-year to $22.45 billion. Its gross profit rose 3.5% from the year-ago value to $15.58 billion.
The company’s adjusted net earnings from continuing operations amounted to $6.84 billion, representing a marginal increase from the same period last year. Also, its adjusted net earnings per share from continuing operations for the quarter increased 10.2% year-over-year to $2.82.
As per the updated guidance for the fiscal year 2024, JNJ forecasts operational sales between $89.20 billion and $89.60 billion, a 6% increase from 2023, primarily driven by recent acquisitions. The company also expects adjusted EPS between $9.97 and $10.07.
The consensus revenue estimate of $22.47 billion for the fiscal fourth quarter (ending December 2024) represents a 5% increase year-over-year. The company expects its EPS to be $2.28. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past three months, the stock has surged 10.1%, closing the last trading session at $161.17.
JNJ’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
JNJ has a B grade for Value, Stability, and Quality. It is ranked #17 out of 159 stocks in the Medical - Pharmaceuticals industry. Click here to see the additional ratings for JNJ (Growth, Momentum, and Sentiment).
AbbVie Inc. (ABBV)
ABBV is a global diversified research-based biopharmaceutical company engaged in manufacturing and selling medications and therapies. It offers a comprehensive product portfolio across Immunology, Oncology, Neuroscience, Eye Care, Aesthetics, and Other Specialties.
On August 19, ABBV received conditional marketing authorization from the EC for TEPKINLY (epicoritamab). This approval marks the first and only subcutaneous bispecific antibody granted such status as a monotherapy for treating both relapsed or refactory (R/R) follicular lymphoma (FL) and R/R diffuse large B-cell lymphoma (DLBCL) after two or more prior therapies.
In the same month, ABBV announced the acquisition of Cerevel Therapeutics (CERE) to strengthen its position in neuroscience and expand its portfolio in psychiatry, migraine, and Parkinson’s disease, bolstering its existing pipeline and market presence.
For the six-month period that ended on June 30, 2024, ABBV’s net revenue increased 2.6% year-over-year to $26.77 billion, while the company’s Neuroscience segment reported net revenue of $4.13 billion, indicating a 15.3% growth from the prior-year period.
ABBV’s attributable net income came in at $2.74 billion, up 21% year-over-year, while its earnings per share attributable grew 21.4% from the year-ago value to $1.53.
Looking ahead, ABBV raised its adjusted EPS to range between $10.71 and $10.91 from the prior forecast of $10.61 and $10.81.
Street expects ABBV’s revenue and EPS for the fiscal fourth quarter (ending December 2024) to increase 2.4% and 5.7% year-over-year to $14.64 billion and $2.95, respectively. Moreover, it beat the revenue estimates in each of the trailing four quarters, which is promising.
Shares of ABBV have gained 27% over the past nine months and 32% over the past year to close the last trading session at $196.82.
ABBV’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
ABBV has a B grade for Growth, Value, Sentiment, Stability, and Quality. It is ranked #3 out of 159 stocks in the Medical - Pharmaceuticals industry.
In addition to the POWR Ratings we’ve stated above, we also have ABBV ratings for Momentum. Get all ABBV ratings here.
Thermo Fisher Scientific Inc. (TMO)
TMO is engaged in helping life sciences research, increasing laboratory productivity, and improving patient health through diagnostics and the development and manufacture of life-changing therapies globally. It operates through four segments: Life Sciences Solutions; Analytical Instruments; Specialty Diagnostics; and Laboratory Products and Biopharma Services.
On July 10, TMO acquired Olink Holding AB (OLK), a leading provider of next-generation proteomics solutions, in a transaction valued at approximately $3.10 billion, net of $96 million in acquired cash.
This acquisition will be integrated into TMO’s Life Sciences Solutions segment. This move enhances TMO’s capabilities in the rapidly growing proteomics market, accelerating scientific discoveries and boosting shareholder value.
For the second quarter of 2024, which ended on June 29, TMO’s operating income increased 15.3% year-over-year to $1.82 billion. Its adjusted net income for the quarter amounted to $2.06 billion, representing an increase of 3% from the same period last year, while its adjusted EPS stood at $5.37, up 4.3% year-over-year. Also, the company’s non-GAAP free cash flow grew 32.8% from the year-ago value to $1.67 billion.
Building on this quarter’s momentum and successful acquisition, the company updated its annual guidance for 2024. TMO anticipates full-year revenue to range between $42.40 billion and $43.30 billion. It also forecasts adjusted EPS in the range of $21.29 to $22.07, slightly higher than the prior forecast of $21.14 to $22.02.
The consensus revenue estimate of $11.35 billion for the fiscal fourth quarter (ending December 2024) represents a 4.2% increase year-over-year. The consensus EPS estimate of $5.98 for the same quarter indicates a 5.5% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has surged 15.4%, closing the last trading session at $612.72.
TMO’s POWR Ratings reflect its bright outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
TMO has a B grade for Stability and Sentiment. It is ranked #8 out of 39 stocks in the Medical - Diagnostics/Research industry. Click here to see the additional ratings for TMO (Growth, Value, Momentum, and Quality).
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.
JNJ shares were trading at $160.52 per share on Thursday afternoon, down $0.65 (-0.40%). Year-to-date, JNJ has gained 4.81%, versus a 20.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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