The rising prevalence of chronic diseases is driving demand for health insurance products and increasing investments in chronic disease management research. This trend is also shifting consumer preferences towards health-oriented goods, making the health and wellness sector a strong market opportunity.
Against this backdrop, it could be wise to watch top health and wellness stocks such as UnitedHealth Group Incorporated (UNH), Thermo Fisher Scientific Inc. (TMO), and Herbalife Ltd. (HLF).
Healthcare expenses have risen steadily, with increasing awareness of health issues prompting insurers to include these services in their policies. This shift reflects consumer demand for comprehensive wellness solutions and ensures that health expenditures remain a priority across economic cycles. Consequently, the global health insurance market is projected to reach $2.38 trillion this year.
Meanwhile, companies are increasingly focusing on innovations in personalized medicine and diagnostic tools to improve preventive care, leading to better health outcomes and reduced long-term costs. This segment is set to grow, emphasizing early detection and tailored healthcare solutions. For 2024, R&D World forecasts a global investment of $2.53 trillion in R&D, an 8.3% increase from the 2022 forecast.
Furthermore, there is a notable shift towards health-oriented consumer goods, such as nutritional supplements, organic foods, and personal care products, reflecting changing consumer preferences for healthier options. With consumers increasingly investing in wellness, the global consumer healthcare market is projected to exceed $708.44 billion by 2034, growing at a CAGR of 7.9%.
Considering these conducive trends, let’s analyze the fundamentals of the three health and wellness picks mentioned above.
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified healthcare company in the United States. The company operates through four segments: UnitedHealthcare, Optum Health, Optum Insight, and OptumRx.
On August 13, 2024, UNH announced it will continue serving Florida Medicaid members through 2030 in 30 counties. The company will work with the Florida Agency for Health Care Administration (AHCA) to provide various healthcare services.
In terms of the trailing-12-month EBITDA margin, UNH’s 8.89% is 42.9% higher than the 6.22% industry average. Likewise, its 1.36x trailing-12-month asset turnover ratio is 229.7% higher than the 0.41x industry average. Its 8.18% trailing-12-month EBIT margin is 207.8% higher than the 2.66% industry average.
During the third quarter that ended September 30, 2024, UNH’s total revenues increased 9.2% year-over-year to $100.82 billion. The company’s earnings from operations came in at $8.71 billion, up 2.1% from the year-ago value.
Moreover, its adjusted net earnings attributable to UNH common shareholders came in at $6.65 billion and $7.15 per share, up 8.4% and 9% from the previous year’s quarter, respectively.
Street expects UNH’s EPS and revenue for the quarter ending December 31, 2024, to increase 10.1% and 7.7% year-over-year to $6.78 and $101.65 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 19.9% to close the last trading session at $562.05.
UNH’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #4 out of 10 stocks in the A-rated Medical - Health Insurance industry. It has a B grade for Stability and Sentiment. Click here to see UNH’s ratings for Growth, Value, Momentum, and Quality.
Thermo Fisher Scientific Inc. (TMO)
TMO provides life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products and biopharma services internationally. It operates in four segments: Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Biopharma Services.
On July 11, 2024, TMO announced its partnership with the National Cancer Institute to accelerate myeloid cancer research through the myeloMATCH precision medicine trial, utilizing next-generation sequencing for rapid patient matching to clinical trials. This initiative aims to improve treatment options for Acute Myeloid Leukemia and Myelodysplastic Syndrome by quickly identifying specific genetic biomarkers.
In terms of the trailing-12-month levered FCF margin, TMO’s 15.39% is 917.2% higher than the 1.51% industry average. Its 0.44x trailing-12-month asset turnover ratio is 7% higher than the 0.41x industry average. Similarly, the stock’s 17.58% trailing-12-month EBIT margin is 562.1% higher than the 2.66% industry average.
For the second quarter of 2024, which ended on June 29, TMO’s revenues were $10.54 billion, and operating income for the same period increased 15.3% year-over-year to $1.82 billion. Also, its adjusted net income and adjusted EPS for the quarter amounted to $2.06 billion and $5.37, representing an increase of 3% and $0.43 from the same period last year.
For the quarter ended September 30, 2024, TMO’s revenue is expected to increase marginally year-over-year to $10.63 billion. Its EPS for the quarter ending December 31, 2024, is expected to grow 5.3% year-over-year to $5.97. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 23.8% to close the last trading session at $604.55.
TMO’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Stability and Sentiment. It is ranked #5 out of 40 stocks in the Medical - Diagnostics/Research industry. To access additional grades for TMO’s Growth, Value, Momentum, and Quality ratings, click here.
Herbalife Ltd. (HLF)
HLF provides health and wellness products in North America, Mexico, South and Central America, Europe, the Middle East, Africa, China, and the Asia Pacific. It offers products in the areas of weight management, targeted nutrition, energy, sports and fitness, outer nutrition, and literature and promotional items.
In terms of the trailing-12-month Return on Total Capital, HLF’s 15.83% is 130.2% higher than the 6.88% industry average. Likewise, its 44.41% trailing-12-month gross profit margin is 23.9% higher than the 35.84% industry average. However, its 10.41% trailing-12-month EBITDA margin is 18.5% lower than the 12.77% industry average.
In the second quarter that ended June 30, 2024, HLF’s worldwide net sales reached $1.28 billion, down 2.5% year-over-year. For the same quarter, its operating income declined by 34.8% compared to the prior year, totaling $80.40 million. Moreover, as of June 30, 2024, the company’s total liabilities stood at $3.64 billion, compared to $3.87 billion as of December 31, 2023.
Analysts expect HLF’s revenue for the quarter ending March 31, 2025, to increase 2.2% year-over-year to $1.29 billion. Likewise, its EPS for fiscal 2025 is expected to increase 32.8% year-over-year to $2.01. Over the past month, the stock has declined 2.7% to close the last trading session at $6.87.
HLF’s mixed fundamentals are reflected in its POWR Ratings. It has an overall rating of C, which translates to a Neutral in our proprietary rating system.
It has a C grade for Stability. Within the A-rated Medical - Consumer Goods industry, it is ranked #7 out of 9 stocks. To see HLF’s Growth, Value, Momentum, Sentiment, and Quality ratings, click here.
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UNH shares were trading at $568.43 per share on Thursday afternoon, down $2.91 (-0.51%). Year-to-date, UNH has gained 9.24%, versus a 23.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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