The healthcare sector had attracted increased investor interest amid the height of the COVID-19 pandemic, which fueled revenue growth for most companies in this space. However, the major stock market indexes have been logging losses lately due to concerns over inflation and recession prospects.
With the Fed expected to remain hawkish in its efforts to tame the 40-year high inflation, many analysts expect the Fed’s rate hikes to eventually result in a recession, leading to further downside for most stocks.
Investing in healthcare stocks could help hedge some market risks thanks to the nearly inelastic demand the sector enjoys. The U.S. national health expenditure reached an all-time high of 19.7% of GDP in 2020, and it’s expected to top $6.2 trillion by 2028. In addition, the global consumer healthcare market is expected to reach $6.65 trillion by 2028, growing at a CAGR of 8.5%.
Medical stocks Cigna Corporation (CI), Humana Inc. (HUM), and McKesson Corporation (MCK) have shown decent momentum lately. So, investing in these stocks could help capitalize on their continued momentum amid the market’s downtrend.
Cigna Corporation (CI)
CI is an insurance service provider operating through two segments: Evernorth; and Cigna Healthcare. The company offers a range of coordinated and point solution health services and intelligence solutions through its Evernorth segment.
On the other hand, its Cigna Healthcare segment provides products and services, including medical, pharmacy, behavioral health, dental, vision, and health advocacy programs for insured and self-insured customers.
On May 5, CI launched Provider consult services powered by Evernorth to drive better outcomes for cancer patients. Such service is expected to enhance the company’s suite of integrated oncology solutions, which drives better health outcomes at lower costs for patients.
In the fiscal 2022 first quarter (ended March 31, 2022), CI’s total revenues increased 7.4% year-over-year to $44 billion. Its adjusted income from operations increased 16% from the year-ago value to $1.93 billion, while its net income grew marginally year-over-year to $1.18 billion. The company’s net income per share came in at $3.68, representing an 11.5% year-over-year improvement.
Analysts expect CI’s EPS and revenue to increase 5.2% and 2.9% year-over-year to $5.51 and $44.34 billion, respectively, in the fiscal second quarter (ended June 2022). CI has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
CI has gained 31.7% over the past nine months to close the last day trading at $263.52. CI is currently trading above its 50-day and 200-day moving averages of $258.64 and $232.68, respectively, indicating an uptrend.
CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating 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.
CI has a B grade for Growth, Value, Stability, Sentiment, and Quality. The stock is ranked #2 of 10 in the A-rated Medical - Health Insurance industry. Click here to see the CI’s rating for Momentum.
Humana Inc. (HUM)
HUM operates as a health and well-being company through three segments: Retail, Group and Specialty, and Healthcare Services. The company offers medical and supplemental benefit plans to individuals. It also provides insured medical and specialty health insurance benefits and pharmacy solutions.
On June 9, 2022, HUM announced the expansion of onehome, its value-based home care subsidiary in Virginia. Analysts expect this expansion to bring advanced in-home healthcare offerings to Medicare beneficiaries in Virginia and earn substantial revenues.
In the first quarter ended March 31, 2022, HUM’s total revenue increased 16% year-over-year to $23.97 billion. Its net income increased 12.3% from the year-ago value to $930 million, while its adjusted EPS came in at $8.04, representing a 4.8% year-over-year improvement.
The consensus EPS estimate of $7.68 for the fiscal second quarter (ending June 2022) represents an 11.5% improvement year-over-year. The consensus revenue estimate of $23.45 billion for the about-to-be-reported quarter represents a 13.6% increase from the same period last year. HUM surpassed the EPS estimates in each of the trailing four quarters, which is excellent.
The stock has gained 20.3% over the past nine months to close the last trading session at $468.07. HUM is currently trading above its 50-day and 200-day moving averages of $443.26 and $433.16, respectively, indicating an uptrend.
It is no surprise that HUM has an overall rating of A, which translates to Strong Buy in our proprietary rating system. It also has an A grade for Sentiment and a B grade for Growth, Value, and Quality.
The stock is ranked #4 in the Medical - Health Insurance industry. Click here to see the other HUM ratings for Momentum and Stability.
McKesson Corporation (MCK)
MCK is a diversified healthcare service provider focusing on advancing health outcomes for patients globally. It operates its business through four segments: U.S. Pharmaceutical, Prescription Technology Solutions (RxTS), Medical-Surgical Solutions, and International.
On June 23, 2022, MCK partnered with HCA Healthcare, Inc. (HCA) to form an oncology research joint venture to advance cancer care and increase access to oncology clinical research. Brian Tyler, chief executive officer, MCK, said, “the joint venture directly aligns with McKesson’s strategic growth priorities by further expanding our differentiated oncology ecosystem and improving the value proposition for provider and biopharma partners.”
For the fiscal fourth quarter ended March 31, 2022, MCK’s total revenues increased 12% year-over-year to $66.10 billion. The company’s adjusted earnings increased 7% year-over-year to $870 million. Also, its adjusted EPS came in at $5.83, representing an increase of 15% year-over-year.
For the quarter ended June 30, 2022, MCK’s revenue is expected to increase 3.5% year-over-year to $64.90 billion. The Street expects its EPS to increase 13.6% per annum over the next five years. It surpassed consensus EPS estimates in three of the trailing four quarters.
The stock has gained 70.6% over the past year to close the last trading session at $326.21. MCK is currently trading above its 50-day and 200-day moving averages of $320.32 and $265.98, respectively, indicating an uptrend.
MCK’s POWR Ratings reflect these solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Stability, Sentiment, and Quality. Within the Medical - Services industry, it is ranked first out of 83 stocks. To see the rating of MCK for Momentum, click here.
CI shares were trading at $266.59 per share on Friday afternoon, up $3.07 (+1.16%). Year-to-date, CI has gained 17.15%, versus a -19.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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