Digital transformation in the healthcare industry has resulted in many and various scientific breakthroughs over the years, especially since the onset of the COVID-19 pandemic. In addition, ongoing research and development for advanced drugs, devices, or treatments for critical diseases and the aging population, should help healthcare companies grow substantially. Indeed, global healthcare spending could reach more than $10 trillion by 2022.
Furthermore, the inelastic demand for healthcare products should help the industry perform well even if economic growth slows due to the resurgence of COVID-19 cases.
We think rising investor optimism about the industry’s growth prospects should drive the performance of fundamentally sound healthcare stocks UnitedHealth Group Incorporated (UNH), Eli Lilly and Company (LLY), and Abbott Laboratories (ABT) in the near term.
Click here to checkout our Healthcare Sector Report for 2021
UnitedHealth Group Incorporated (UNH)
UNH in Minnetonka, Minn., is a diversified health care and insurance company that offers a broad spectrum of products and services through UnitedHealthcare and Optum platforms. The company provides employers with products and resources to plan and administer employee benefit programs.
In an announcement dated July 20, 2021, UNH’s UnitedHealthcare and Peloton Interactive Inc. (PTON) said they had come together to provide UNH members with access to PTON’s fitness classes via the Peloton App at no additional cost. Expanding access to PTON’s industry-leading health and wellness community builds upon UnitedHealthcare’s commitment to developing digital health resources and consumer-centric benefits to help people live healthier lives.
On July 8, UNH’s UnitedHealthcare introduced the use of predictive analytics to help improve well-being, lower costs and drive engagement in clinical intervention programs by addressing social determinants of health for people in some employer-sponsored benefit plans. The new advocacy capability uses de-identified claims data from UnitedHealthcare members to proactively identify who is most likely to need support with social determinants of health. UNH expects to generate a rising number of enrollments in the coming months.
UNH’s total revenues for its fiscal second quarter ended June 30, 2021, increased 14.8% year-over-year to $71.32 billion. Revenues from the UnitedHealthcare business came were $55.47 billion, up 13% from the prior-year period. And revenues from its Optum business increased 17.2% year-over-year to $38.30 billion. The company had $19.83 billion in cash and cash equivalents as of June 30, 2021.
Analysts expect the stock’s EPS to increase 25.5% for the current quarter (ending September 30, 2021) to $4.41. UNH surpassed the Street’s EPS estimates in each of the trailing four quarters. The $71.10 billion consensus revenue estimate for the current quarter represents a 9.2% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 12.8% rate per annum over the next five years. The stock has gained 29.6% over the past year and 24.7% over the past six months. It closed yesterday’s trading session at $410.87.
UNH’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Stability, and a B grade for Sentiment and Quality. Click here to see the additional ratings for UNH (Growth, Value, and Momentum).
UNH is ranked #1 of 11 stocks in the B-rated Medical – Health Insurance industry.
Eli Lilly and Company (LLY)
LLY discovers, develops, and markets pharmaceutical products for humans and animals worldwide. The company’s products are focused on diabetes, oncology, immunology, neuroscience, and other therapies. LLY is headquartered in Indianapolis, Ind.
On July 29, 2021, the U.S. Food and Drug Administration (FDA) broadened the Emergency Use Authorization (EUA) for baricitinib, which is manufactured by LLY in collaboration with Incyte Corporation (INCY), to allow for treatment with or without remdesivir. With the approval of the FDA, the company is looking forward to using baricitinib as an important treatment for the hospitalized COVID-19 patient population that requires supplemental oxygen, non-invasive or invasive mechanical ventilation, or extracorporeal membrane oxygenation (ECMO).
On the same day, Loxo Oncology at Lilly, LLY’s research and development group, and Kumquat Biosciences, announced an exclusive collaboration focused on discovering, developing and commercializing potential novel small molecules that stimulate tumor-specific immune responses. Both companies are looking forward to identifying candidate medicines that interact with this target class and commercializing them together worldwide.
For its fiscal second quarter, ended June 30, 2021, LLY’s total revenues came in at $6.74 billion, representing a 22.6% increase from the prior-year period. While its non-GAAP net income increased 28.7% year-over-year to $1.70 billion, its non-GAAP EPS increased 29% year-over-year to $1.87. The company had $3.22 billion in cash and cash equivalents as of June 30, 2021.
For the current quarter ending September 30, 2021, analysts expect LLY’s EPS to be $1.94, representing a 25.8% rise from the prior-year period. Analysts expect the stock’s revenue to improve 14.8% in the current quarter to $6.59 billion. The stock is expected to grow at a 14.9% rate per annum over the next five years. LLY has rallied 87.7% over the past nine months and 13.7% over the past month. It ended yesterday’s trading session at $267.16.
LLY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Stability and Quality. We have also graded LLY for Growth, Value, Sentiment, and Momentum. Click here to access all LLY ratings.
Of the 217 stocks in the Medical – Pharmaceuticals industry, LLY is ranked #14.
Abbott Laboratories (ABT)
Based in Abbott Park, Ill., ABT discovers, develops, manufactures, and sells various health care products focused on cardiovascular, diabetes care, diagnostics, neuromodulation, nutrition, and medicine. Its products are sold directly to wholesalers, distributors, government agencies, health care facilities, pharmacies, and independent retailers.
On August 3, 2021, ABT received U.S. FDA clearance for its latest optical coherence tomography (OCT) imaging platform that is powered by its new Ultreon Software. This innovative imaging software combines OCT with AI to provide physicians an enhanced, comprehensive view of coronary blood flow and blockages, assist in decision-making, and provide the best pathway for treatment. The company expects to witness widespread recognition in the industry in the coming months as a result.
On July 29, ABT launched its latest insertable cardiac monitor (ICM), Jot Dx, that allows remote detection and improved diagnostic accuracy of cardiac arrhythmia in patients. Jot Dx ICM is supported by SyncUP, a personalized service that delivers one-on-one training and education to help patients stay connected to their ICM. Amid the rising focus on telehealth and connected care technology, this ICM will likely gain expanded market reach in the coming months.
For its fiscal second quarter, ended June 30, 2021, ABT’s net sales came in at $10.22 billion, representing a 39.5% increase from the prior-year period. The company’s adjusted gross profit increased 41.8% year-over-year to $5.82 billion. Its adjusted operating income has been reported at $2.47 billion for the quarter, up 99.6% from the prior-year period. While its adjusted net earnings increased 107.8% year-over-year to $2.12 billion, its adjusted EPS increased 105.3% to $1.17.
ABT surpassed the Street’s EPS estimates in each of the trailing four quarters. And analysts expect ABT’s revenue to improve 6.8% year-over-year for the current quarter, to $9.45 billion. The stock’s EPS is expected to grow at a 12.8% rate per annum over the next five years.
The stock has gained 12.6% over the past nine months and 2.9% over the past month. It ended yesterday’s trading session at $123.16.
It’s no surprise that ABT has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
The stock has a B grade for Growth, Value, Stability, Sentiment, and Quality. Click here to see the additional ratings for ABT’s Momentum.
ABT is ranked #11 of 217 stocks in the Medical – Pharmaceuticals industry.
Click here to checkout our Healthcare Sector Report for 2021
UNH shares were trading at $412.26 per share on Tuesday morning, up $1.39 (+0.34%). Year-to-date, UNH has gained 18.41%, versus a 19.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…
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