The rapid spread of the highly contagious COVID-19 Delta variant has been driving renewed investor attention in the healthcare industry. This is evidenced by the Health Care Select Sector SPDR Fund’s (XLV) 8.9% returns over the past three months versus the SPDR S&P 500 ETF Trust’s (SPY) 5.1% gains.
The healthcare sector is expected to continue thriving with the relatively inelastic demand for healthcare products and services, along with a growing aging population. Furthermore, with the increasing integration of advanced technologies in the healthcare space, the industry could generate significant returns in the coming months. According to an IndustryResearchBiz report, the global pharma and healthcare market is expected to hit $1.58 trillion by 2027.
So, we think it could be wise to bet on quality healthcare stocks Thermo Fisher Scientific Inc. (TMO), Novartis AG (NVS), and Medtronic plc (MDT) because they have immense growth potential. Also, these stocks have an A or B rating for Growth in our POWR Ratings system.
Click here to checkout our Healthcare Sector Report for 2021
Thermo Fisher Scientific Inc. (TMO)
TMO offers life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products and services worldwide. It provides its products and services through various brands, including Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific, and Unity Lab Services.
On July 15, TMO opened a new cGMP plasmid DNA manufacturing facility in Carlsbad, California. This is expected to help the company meet rapidly increasing demand for plasmid DNA-based therapies and vital mRNA-based vaccines.
TMO’s revenue increased 34.1% year-over-year to $9.27 billion for its fiscal second quarter, ended July 3, 2021. The company’s operating income for the quarter came in at $2.16 billion, representing a 55.5% year-over-year rise. Its non-GAAP net income increased 43.2% from the same period last year to $2.22 billion. And its non-GAAP EPS came in at $5.60, up 44% year-over-year. TMO’s revenue and EPS have increased at CAGRs of 18.3% and 53.9%, respectively, over the past three years.
The company’s revenue and EPS are expected to increase 10.7% and 13.1%, respectively, year-over-year to $35.66 billion and $22.12 in its fiscal year 2021. TMO has surpassed the Street’s EPS estimates in each of the trailing four quarters, which is impressive. The stock has gained 14.8% over the past three months to close Friday’s trading session at $540.01.
TMO’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 POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has a B grade for Growth. We’ve also graded TMO for Value, Momentum, Stability, Sentiment, and Quality. Click here to access all the TMO ratings. TMO is ranked #9 of 55 stocks in the Medical – Diagnostics/Research industry.
Novartis AG (NVS)
Headquartered in Basel, Switzerland, NVS is one of the world’s largest pharmaceutical companies. It operates through two segments: Innovative Medicines and Sandoz. In addition, the company uses science and digital technologies for treatments of diseases in the areas of immunology, dermatology, and cancer, among others.
NVS and Hewlett Packard Enterprise Company (HPE) announced a collaboration in June 2021 to focus on three global health enablers: identifying and integrating complex data sources related to health; advancing the application of artificial intelligence, machine learning, and geospatial analytics to these data; and expanding access to technology in remote and underserved locations. This is expected to help NVS integrate diverse data sources to enable real-time disease insights to inform targeted response strategies.
For the second quarter ended June 30, 2021, NVS’ net sales came in at $12.96 billion, up 14.2% year-over-year. This was driven primarily by the high sales growth of Entresto, Cosentyx, Zolgensma, and Lucentis. Its net income increased 55.1% year-over-year to $2.90 billion, while its core EPS increased 22.1% year-over-year to $1.66. Its EBITDA and levered FCF margin have increased at CAGRs of 10.2% and 13.6%, respectively, over the past three years.
Analysts expect NVS’ revenue to increase 6.5% year-over-year to $51.81 billion in the current year. The company’s EPS is expected to come in at $1.64 for the quarter ending September 30, 2021, representing a 7.9% year-over-year rise. The stock has rallied 8.4% over the past three months to close Friday’s trading session at $92.39.
NVS’ POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. In addition, the stock has an A grade for Growth and Stability, and a B grade for Value and Quality.
In addition to the POWR Rating grades we’ve just highlighted, one can see NVS’ ratings for Momentum and Sentiment here. NVS is ranked #2 of 220 stocks in the Medical – Pharmaceuticals industry.
Medtronic plc (MDT)
Based in Dublin, Ireland, MDT develops , manufactures, distributes, and sells device-based medical therapies to hospitals, physicians, clinicians, and patients worldwide. The company operates through four segments: Cardiovascular Portfolio; Neuroscience Portfolio; Medical-Surgical Portfolio; and Diabetes Operating Unit.
MDT announced U.S. Food and Drug Administration (FDA) clearance on July 28 for two AccuRhythm AI algorithms for the LINQ II insertable cardiac monitor (ICM). The company’s president of its Cardiovascular Diagnostics and Services business, Julie Brewer, said, “We are excited to integrate AI capabilities to further elevate the accuracy of LINQ II ICM—and provide clinicians with greater confidence in patient care decisions.”
The company’s net sales increased 36.5% year-over-year to $8.19 billion for its fiscal fourth quarter, ended April 30, 2021. MDT’s operating profit increased 406.9% year-over-year to $1.61 billion. Its non-GAAP net income came in at $2.04 billion, representing a 162.3% year-over-year rise. Its non-GAAP EPS was $1.54, up 165.5% year-over-year. And its EPS and net income have increased at CAGRs of 5.4% and 5.1%, respectively, over the past three years.
MDT’s revenue is expected to increase 10.3% year-over-year to $33.20 billion in fiscal 2022. Its EPS is expected to grow 112.9% year-over-year to $1.32 for the about-to-be-reported quarter ended July 31, 2021. It has surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has soared nearly 18% over the past six months to close Friday’s trading session at $131.31.
It’s no surprise that MDT has an overall B rating, which equates to Buy in our POWR Rating system. Also, the stock has an A grade for Growth, and a B grade for Stability. Click here to see the additional POWR Ratings for MDT (Value, Momentum, Sentiment, and Quality).
MDT is ranked #30 of 186 stocks in the Medical – Devices & Equipment industry.
Click here to checkout our Healthcare Sector Report for 2021
TMO shares were trading at $531.89 per share on Monday morning, down $8.12 (-1.50%). Year-to-date, TMO has gained 14.32%, versus a 18.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More…
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