Healthcare stocks may help deliver steady gains across business cycles. Typically, healthcare companies are viewed as recession-resistant, and enjoy a stable stream of cash flows. Further, these companies invest heavily in research and development, enabling them to treat a wide range of diseases, making healthcare players a key part of the global economy.
In the past two decades, healthcare giants such as Novo Nordisk (NVO) and Eli Lilly & Co. (LLY) have delivered substantial returns to shareholders. While Eli Lilly stock is up 1,751% over this time frame, Novo Nordisk stock has surged a staggering 7,565% since February 2004, after adjusting for dividends.
Let’s see which healthcare giant is a better buy for 2024, according to consensus estimates.
Is Novo Nordisk Stock a Good Buy?
Valued at $527 billion by market cap, Novo Nordisk is a Europe-based biotechnology company. Despite its massive size, Novo Nordisk increased sales by 37% year over year in Q4 of 2023 to $9.9 billion. The key driver of the top line in Q4 was Novo Nordisk’s obesity care business, which more than doubled year-over-year. In fact, sales for Wegovy, its weight-loss drug, grew by roughly 300% to $1.4 billion in the December quarter.
The demand for obesity-related medication is projected to grow in 2024 and through the upcoming decade due to poor dietary patterns, unhealthy lifestyles, and the lack of exercise all over the world. Sales in North America alone grew by 60% in Q4 to $6.4 billion, while in other international markets the top line grew by 8% to $3.5 billion.
Earlier this week, Novo Nordisk disclosed plans to acquire healthcare manufacturer Catalent (CTLT) at an enterprise value of $16.5 billion. Catalent operates over 50 manufacturing facilities globally, and should further diversify Novo’s revenue base in the upcoming decade.
Analysts expect NVO to increase sales by 21.5% to $41.2 billion in 2024, while earnings growth is forecast at 19.5%. Priced at 36.3 times forward earnings, Novo stock is not too expensive.
Out of the 12 analysts covering Novo Nordisk stock, eight recommend “strong buy,” one recommends “moderate buy,” two recommend “hold,” and one recommends “moderate sell.”
The average target price for the healthcare stock is $120.05, only 1.2% higher than the current trading price.
What's the Forecast for Eli Lilly Stock?
Eli Lilly stock was volatile Tuesday, with the stock erasing early gains after the company crushed Wall Street estimates in Q4. It reported revenue of $9.35 billion in Q4, compared to estimates of $8.93 billion. Its adjusted earnings were $2.49 per share, above consensus estimates of $2.22 per share.
Sales grew by 28% year over year in Q4, which prompted Eli Lilly to issue stellar guidance for 2024. It now expects sales between $40.4 billion and $41.6 billion in 2024, with earnings forecast between $12.20 and $12.70 per share. Comparatively, analysts forecast sales at $39.4 billion with earnings of $12.43 per share in 2024.
Similar to Novo Nordisk, Eli Lilly is also banking heavily on its weight loss drug, Zepbound, to drive sales going forward. Zepbound was approved by regulators in the U.S. last November, and yielded $176 million in sales in Q4. The drug may rake in close to $1 billion in sales in its first 12 months.
Out of the 21 analysts covering LLY, 18 recommend “strong buy,” one recommends “moderate buy,” and two recommend “hold.” The average target price for the healthcare stock is $642.90 - a discount of nearly 12% to the stock's current trading price.
