The healthcare industry was in the limelight during the COVID-19 pandemic due to the high demand for its products and services and the focus on finding a permanent cure. Post the pandemic, the increased health consciousness and increasing focus on advanced treatments have been helping the industry perform steadily.
The new-age healthcare industry is boosted by technological developments and innovations that enhance its efficiency and quality of services. According to Statista, the revenue of the healthcare segment is expected to grow at a CAGR of 11.8% to reach $83.42 billion by 2025.
According to the Labor Department, employment in the healthcare sector has enjoyed strong gains. At a time when other industries are laying off the workforce, this sector gained 53,000 jobs in October, boosted by growth in ambulatory healthcare services, as well as nursing and residential care facilities.
The Centers for Medicare & Medicaid Services (CMS) expects healthcare spending in the United States to grow at a CAGR of 5.4% to reach $6.2 trillion in 2028. The rapidly aging population and the upsurge in lifestyle diseases are expected to keep the demand for healthcare strong irrespective of the economic downturn.
Given the sector’s resilience to economic cycles and solid growth prospects, investors could consider buying quality healthcare stock UnitedHealth Group Incorporated (UNH), CVS Health Corporation (CVS), Zoetis Inc. (ZTS), and Teva Pharmaceutical Industries Limited (TEVA).
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified healthcare company in the United States. It operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight, and OptumRx.
Over the last three years, UNH’s dividend payouts have grown at a 16.1% CAGR. Its four-year average dividend yield is 1.4%, and its current dividend translates to a 1.2% yield. It is expected to pay a quarterly dividend of $1.65 per share on December 13, 2022.
UNH’s total assets increased 14.5% to $243.06 billion for the third quarter ended September 30, 2022, compared to $212.21 billion as of December 31, 2021. The company’s total revenues increased 11.8% year-over-year to $80.89 billion.
Adjusted net earnings attributable to UNH common shareholders increased 27.2% year-over-year to $5.49 billion. In addition, its adjusted EPS came in at $5.79, representing a 28.1% increase from the prior-year quarter.
UNH’s EPS and revenue for the quarter ending December 31, 2022, are expected to increase 16% and 11.1% year-over-year to $5.20 and $81.93 billion, respectively. The company has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 19.5% to close the last trading session at $553.05.
UNH’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the A-rated Medical - Health Insurance industry, it is ranked #4 out of 11 stocks. The company has a B grade for Growth, Stability, Sentiment, and Quality.
Click here to see the additional ratings of UNH for Value and Momentum.
CVS Health Corporation (CVS)
CVS provides health services in the United States. It operates through three segments: Health Care Benefits, Pharmacy Services, and Retail/LTC.
Over the last three years, CVS’ dividend payouts have grown at a 3.2% CAGR. Its four-year average dividend yield is 2.8%, and its current dividend translates to a 2.2% yield. The company paid a quarterly dividend of $0.55 per share on November 1, 2022.
On September 5, 2022, CVS and Signify Health (SGFY) entered a definitive agreement under which CVS Health will acquire Signify Health.
CVS Health President and CEO Karen S. Lynch said, "This acquisition will enhance our connection to consumers in the home and enables providers to better address patient needs as we execute our vision to redefine the health care experience. In addition, this combination will strengthen our ability to expand and develop new product offerings in a multi-payor approach."
For the fiscal third quarter ended September 30, 2022, CVS’ total revenues increased 10% year-over-year to $81.16 billion. Its adjusted operating income increased 3.9% year-over-year to $4.23 billion.
The company’s adjusted income increased 5.3% year-over-year. Moreover, its adjusted EPS came in at $2.09, representing an increase of 6.1% year-over-year.
Analysts expect CVS’ revenue for the quarter ending December 31, 2022, to increase marginally year-over-year to $76.81 billion. Its EPS for fiscal 2022 is expected to increase 2.5% year-over-year to $8.61.
It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 8.4% to close the last trading session at $101.65.
CVS’ strong 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.
It is ranked first out of 4 stocks in the Medical - Drug Stores industry. It has an A grade for Growth and a B for Stability and Sentiment. We have also given CVS grades for Value, Momentum, and Quality. Get all CVS ratings here.
Zoetis Inc. (ZTS)
ZTZ discovers, develops, manufactures, and commercializes animal health medicines, vaccines, and diagnostic products in the United States and internationally. It commercializes products primarily across species, including livestock and companion animals.
Over the last three years, ZTS’s dividend payouts have grown at an 18.5% CAGR. Its four-year average dividend yield is 0.6%, and its current dividend translates to a 1% yield. It is expected to pay a quarterly dividend of $0.33 per share on December 1, 2022.
On September 30, 2022, ZTS announced its acquisition of Jurox, a privately held animal health company. Its U.S. segment’s gross profit increased 2% year-over-year to $886 million. The acquisition is believed to bring ZTS a range of products primed for greater global expansion.
ZTS’ revenue for the third quarter ended September 30, 2022, increased marginally year-over-year to $2 billion. The company’s total liabilities declined 3.7% to $9.01 billion, compared to $9.35 billion for the fiscal year ended December 31, 2021.
Analysts expect ZTS’s EPS and revenue for the quarter ending December 31, 2022, to increase 13.9% and 1.7% year-over-year to $1.14 and $2 billion, respectively. Over the past month, the stock has fallen 7.6% to close the last trading session at $136.21.
ZTS’ POWR Ratings reflect its positive outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
It is ranked #21 out of 164 stocks in the Medical - Pharmaceuticals industry. In addition, it has a B grade for Growth, Stability, and Quality. To see the other ratings of ZTS for Value, Momentum, and Sentiment, click here.
Teva Pharmaceutical Industries Limited (TEVA)
Headquartered in Tel Aviv-Yafo, Israel, TEVA is a pharmaceutical company that develops, manufactures, markets, and distributes generic, specialty, and biopharmaceutical products in North America, Europe, and internationally.
TEVA’s net cash provided by operating activities for the third quarter ended September 30, 2022, increased 2.6% year-over-year to $543 million. Its non-GAAP net income attributable to Teva increased 1.1% year-over-year to $658 million. In addition, its non-GAAP EPS came in at $0.59.
For the quarter ending March 31, 2023, TEVA’s EPS is expected to increase 5.9% year-over-year to $0.58. Its revenue for fiscal 2023 is expected to increase 1.9% year-over-year to $15.34 billion. TEVA has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
Over the past six months, the stock has gained 15.8% to close the last trading session at $9.08.
TEVA’s solid prospects are reflected in its POWR Ratings. The company has an overall rating of B, which equates to a Buy in our proprietary rating system. It is ranked #31 in the Medical - Pharmaceuticals industry. In addition, it has an A grade for Growth and Value.
Click here to see the other ratings of TEVA for Momentum, Stability, Sentiment, and Quality.
UNH shares were trading at $543.71 per share on Wednesday afternoon, down $9.34 (-1.69%). Year-to-date, UNH has gained 9.33%, versus a -20.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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