With increasing medical demands amid a growing geriatric population and rising prevalence of chronic diseases, the medical sector is well-poised for considerable growth in the foreseeable years. Moreover, the rising adoption of digital technology in healthcare has been advancing and providing new possibilities for care, diagnosis, and treatment that can improve quality of life.
Given the industry’s promising outlook, it could be wise to buy quality medical stocks Cardinal Health, Inc. (CAH), Fresenius SE & Co. KGaA (FSNUY), and Zynex, Inc. (ZYXI) for solid gains.
The U.S. medical industry is enormous and continues to grow as the population swells. U.S. healthcare spending rose 4.1% year-over-year to $4.5 trillion in 2022, much faster than the rise of 3.2% in 2021. The last year’s increase reflects solid growth in Medicaid and private health insurance spending. Hospital care (nearly 30%) accounts for the majority share of expenditure.
Hospitals serve as vital medical facilities, offering comprehensive care, treatments, and services to individuals in need of medical attention. The global hospital market is expected to grow at a CAGR of 6.7% from 2023 to 2031.
Further, there is a significant demand for medical devices and equipment used in healthcare settings. Ongoing trends in the medical devices industry include the adoption of digital health technologies, the growth in wearable medical devices, and enhanced emphasis on personalized and minimally invasive technologies.
The U.S. medical devices market is estimated to be worth around $246.51 billion by 2032, expanding at a CAGR of 5.6% from 2023 to 2032.
Medical companies and institutions plan to expand virtual healthcare options. Virtual health services, also known as telehealth or telemedicine, refer to the use of digital technologies to deliver medical care, health information, or health education. The global virtual health service market is projected to reach $50.90 billion by 2032, exhibiting a CAGR of 22.4%.
Given the industry’s bright growth prospects, fundamentally strong medical stocks CAH, FSNUY, and ZYXI could be ideal additions to your portfolio for potential gains.
Let’s discuss the fundamentals of these stocks in detail:
Cardinal Health, Inc. (CAH)
CAH operates as a healthcare services and products company in the U.S., Canada, Europe, Asia, and internationally. The company offers customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home. It operates in two segments: Pharmaceutical and Medical.
On November 9, CAH announced the U.S. launch of SmartGown™ EDGE Breathable Surgical Gown with ASSIST™ Instrument Pockets, designed and developed to provide surgical teams safe and convenient instrument access in the operating room.
This innovative gown is designed to hold one recommended instrument per pocket during surgical procedures, enhancing handling efficiency and enabling clinical teams to focus on delivering safe patient care.
On August 30, CAH launched its next generation NTrainer™ System 2.0, a medical device developed for helping premature and new-born infants develop the oral coordination skills for transition to independent feeding faster, thus helping to reduce their neonatal intensive care unit (NICU) length of stay.
“The NTrainer™ System demonstrates Cardinal Health's investment in innovation to help improve patient outcomes and increase caregiver confidence while providing objective data important for delivering consistent patient care,” said Steve Mason, CEO of Cardinal Health’s Medical Segment.
CAH’s revenues increased 10% year-over-year to $54.8 billion in the first quarter that ended September 30, 2023. Its non-GAAP operating earnings grew 35% from the year-ago value to $571 million. In addition, non-GAAP net earnings attributable to CAH and non-GAAP earnings per share rose 32% and 44% year-over-year to $433 million and $1.73, respectively.
The company raised its full-year 2024 guidance. The company guidance updated its Pharmaceutical segment profit outlook for fiscal 2024 to 7% to 9% growth, from 4% to 6% growth. Also, CAH increased its non-GAAP earnings per share to $6.75 to $7.00, from the previously stated $6.50 to $6.75.
Street expects CAH’s revenue for the second quarter (ending December 2023) to increase 10.7% year-over-year to $56.96 billion. Likewise, the company’s EPS is expected to grow 20.8% year-over-year to $1.59. Further, the company surpassed the consensus EPS estimate in each of the trailing four quarters, which is remarkable.
Shares of CAH have gained 31.6% year-to-date and 27.6% over the past year to close the last trading session at $100.96.
CAH’s solid prospects 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. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Growth and Value. CAH is ranked #2 out of 65 stocks in the Medical - Services industry.
Click here to access additional CAH ratings for Quality, Stability, Sentiment, and Momentum.
Fresenius SE & Co. KGaA (FSNUY)
Headquartered in Bad Homburg vor der Höhe, Germany, FSNUY is a healthcare company that offers products and services for dialysis, hospitals, and outpatient medical care. The company operates through four segments: Fresenius Medical Care; Fresenius Kabi; Fresenius Helios; and Fresenius Vamed.
On December 14, FSNUY announced that it had signed a multi-year agreement under which the Mayo Clinic is expected to buy 10,000 Ivenix large-volume infusion pumps for its hospitals and clinics located in Minnesota, Arizona, and Florida.
The agreement marks the largest contract for Ivenix pumps of Fresenius signed to date and is in the furtherance of implementation of the company’s Vision 2026 strategy.
On July 3, FSNUY launched Idacio, a biosimilar version of Abbvie Inc.’s (ABBV) top-selling rheumatoid arthritis drug Humira. The drug will be available at a 5% discount to Humira’s list price. This will allow FSNUY to compete with other companies for leverage with pharmacy benefit managers.
In the third quarter that ended September 30, 2023, FSNUY’s revenue increased 2.4% year-over-year to €5.52 billion ($6.11 billion), while its gross profit was €1.27 billion ($1.41 billion). Its revenue from Fresenius Helios and Fresenius Vamed segments rose 4.4% and 13.1% from the prior year’s quarter to €2.95 billion ($3.26 billion) and €647 million ($716.18 million), respectively.
Furthermore, the company’s operating cash flow came in at €1.41 billion ($1.26 billion), an increase of 12.1% year-over-year. As of September 30. 2023, its current assets were €44.84 billion ($49.63 billion), compared to €18.28 billion ($20.23 billion) as of December 31, 2022.
Analysts expect FSNUY’s revenue for the fiscal year (ending December 2024) to increase 4.8% year-over-year to $25.94 billion. FSNUY’s stock gained 16.9% over the past six months and 13.3% over the past year to close the last trading session at $7.83.
FSNUY’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.
The stock has an A grade for Value and a B for Stability and Quality. FSNUY has topped the list of 157 stocks in the Medical - Hospitals industry.
To access additional ratings of FSNUY for Growth, Momentum, and Sentiment, click here.
Zynex, Inc. (ZYXI)
ZYXI designs, manufactures, and markets medical devices to treat chronic and acute pain; and activate and exercise muscles for rehabilitative purposes with electrical stimulation. It provides NexWave, NeuroMove, InWave, and E-Wave. The company also supplies privately labeled products, including electrodes and batteries for use in electrotherapy products.
On November 13, ZYXI submitted a 510(k) application to the U.S. Food and Drug Administration (FDA) for the M-Wave Neuromuscular Electrical Stimulation (NMES) device. The M-Wave is expected to replace the E-Wave, which has been fundamental in Neuromuscular Electrical Stimulation (NMES) treatments.
“We are excited to introduce the M-Wave, a device that showcases our ongoing commitment to improving the lives of patients dealing with neuromuscular conditions,” said Thomas Sandgaard, CEO at Zynex Medical.
On November 1, ZYXI’s board of directors approved a program to repurchase up to $20 million. The program commenced on November 1, 2023, and is scheduled to terminate before November 1, 2024, or when the $20.0 million limit is reached.
ZYXI’s net revenue increased 20.2% year-over-year to $49.91 million for the third quarter that ended September 30, 2023. Its revenue from Devices and Supplies grew 48.5% and 9.5% year-over-year to $16.85 million and $33.06 million, respectively. Its gross profit grew 22.1% from the prior year’s period to $40.40 million.
In addition, the company’s cash and cash equivalents amounted to $42.52 million as of September 30, 2023, compared to $20.14 million as of December 31, 2022..
Analysts expect ZYXI’s revenue and EPS for the second quarter (ending June 2024) to increase 21.5% and 14.8% year-over-year to $54.62 million and $0.10, respectively. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters and the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 12.5% over the past month and 12.2% over the past six months to close the last trading session at $10.77.
ZYXI’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Quality and B for Value. ZYXI is ranked #4 of 10 stocks within the B-rated Medical - Consumer Goods industry.
Click here to access additional POWR Ratings of ZYXI for Sentiment, Growth, Stability, and Momentum.
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.
CAH shares were trading at $100.93 per share on Thursday morning, down $0.03 (-0.03%). Year-to-date, CAH has gained 33.65%, versus a 26.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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