The healthcare industry is well-positioned to grow significantly in the upcoming years, driven by increasing health awareness, an aging population, and a growing prevalence of chronic diseases. Moreover, in this post-pandemic era, the healthcare system aims to accelerate digital transformations by moving to the cloud for various research and developments and leveraging cutting-edge technology like analytics and AI to improve patient care.
The use of precision medication, medical marijuana, and blockchain technology is changing the healthcare industry's face. Revenue in the healthcare segment in the United States is projected to reach $28.77 billion by 2027, growing at a 14.8% CAGR.
Moreover, amid a gloomy economic outlook and ongoing macro headwinds, healthcare stocks seem appealing to investors due to inelastic demand for healthcare products and services. Investors’ interest in the healthcare industry is evident from the Vanguard Health Care ETF’s (VHT) 5.1% returns over the past month.
Given the backdrop, adding fundamentally strong healthcare stocks Johnson & Johnson (JNJ), AbbVie Inc. (ABBV), and CVS Health Corporation (CVS) to your portfolio could be wise.
Johnson & Johnson (JNJ)
As the world’s largest and most broad-based healthcare conglomerate, JNJ researches, develops, manufactures, and sells a wide range of healthcare products. Its business segments include Consumer Health Products; Pharmaceutical Products; and MedTech.
On November 1, 2022, JNJ entered a definitive agreement with Abiomed Inc. (ABMD), a world-leading provider of ground-breaking medical technology that provides circulatory and oxygenation support, by acquiring through tender all its outstanding shares.
Joaquin Duato, JNJ’s Chief Executive Officer, said, “We have committed to enhancing our position in MedTech by entering high-growth segments. The addition of Abiomed provides a strategic platform to advance breakthrough treatments in cardiovascular disease and helps more patients worldwide while driving value for our shareholders.”
JNJ’s sales increased 1.9% year-over-year to $23.8 billion, with adjusted operational growth of 8.2% in the fiscal 2022 third quarter ended September 30, 2022. Its net earnings grew 21.6% year-over-year to $4.45 billion, while its EPS increased 22.6% from the year-ago value to $1.68.
The company has increased its dividend for 59 consecutive years. Its dividend payout has grown at a 6.03% CAGR over the past five years, and the current dividend yields 2.57%.
Analysts expect JNJ’s revenue to increase 1.4% year-over-year to $95.05 billion in fiscal 2022. The company’s EPS for the current fiscal year is expected to increase 2.5% year-over-year to $10.05. It has surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has gained 6% to close the last trading session at $176.20.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Stability and a B for Value and Quality. Within the Medical-Pharmaceuticals industry, it is ranked #8 among a total of 163 stocks.
Beyond what we stated above, we also have JNJ’s ratings for Growth, Sentiment, and Momentum. Get all JNJ ratings here.
AbbVie Inc. (ABBV)
ABBV is a research-based global biopharmaceutical company that discovers, develops, manufactures, and sells pharmaceuticals worldwide. It offers products in various therapeutic categories, including immunology, aesthetics, neuroscience, eye care, women’s health, and other products. These are sold to wholesalers, government agencies, healthcare facilities, and independent retailers.
On October 21, ABBV announced that the U.S. Food and Drug Administration had approved RINVOQ®, an oral therapy, for treating adults with active non-radiographic axial spondyloarthritis with objective signs of inflammation and who have had an inadequate response or intolerance to tumor necrosis factor blocker therapy.
On October 20, ABBV acquired DJS Antibodies, a UK-based biotechnology company dedicated to discovering and developing antibody medicines that target difficult-to-drug disease-causing proteins. This acquisition might help ABBV enhance its current antibody research activities and strengthen its immunology portfolio.
Also, access to DJS’s proprietary HETPAD platform will help ABBV's current robust capabilities in biotherapeutics research.
For the third quarter of fiscal 2022 ended September 30, 2022, ABBV’s net revenues increased 3.3% year-over-year to $14.81 billion. Its operating income increased 6.9% year-over-year to $4.60 billion. The company’s adjusted EPS was $3.66, up 29.3% year-over-year.
The company recently announced a dividend increase of 5%, beginning with the dividend payable in February 2023. ABBV has raised its dividend for the past nine years. It pays a $5.92 per share dividend annually, which translates to a 3.82% yield on the current price. Its dividend payouts have grown at a CAGR of 9.6% over the past three years and 17.3% over the past five years.
Analysts expect ABBV’s EPS to increase 10.8% year-over-year to $3.67for the fiscal fourth quarter ending December 2022. The company’s revenue for the ongoing quarter is expected to increase by 3.1% year-over-year to $15.35 billion. Furthermore, ABBV has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 7.4% over the past month and 32.4% over the last year to close the last trading session at $154.98.
ABBV’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Value and Growth. Within the Medical-Pharmaceuticals industry, it is ranked #4 of 163 stocks.
Beyond what we stated above, we also have ABBV’s ratings for Stability, Sentiment, and Momentum. Get all ABBV ratings here.
CVS Health Corporation (CVS)
CVS Health Corporation and its subsidiaries operate as a leading health solutions company. Its segments include Pharmacy Services; Retail/LTC, Health Care Benefits; and Corporate. Its services comprise health & wellness services, health plans, pharmacy services, and prescription drug coverage.
In September, CVS announced its agreement to acquire Signify Health, Inc. (SGFY) for $30.50 per share in cash, amounting to a total transaction value of approximately $8 billion. This acquisition is expected to strengthen the company’s ability to provide new product offerings in a multi-payer approach.
CVS’s total revenues increased 10% year-over-year to $81.16 billion in the fiscal 2022 third quarter ended September 30, 2022. The company’s adjusted operating income rose 3.9% year-over-year to $4.23 billion. Its adjusted EPS came in at $2.09, registering a 6.1% increase year-over-year.
CVS’s annual dividend of $2.20 per share yields 2.26% on the current price. Its four-year dividend yield is 2.78%. The company’s dividend payments have grown at a 3.2% CAGR over the past three years.
Analysts expect CVS’s revenue and EPS to be $314.19 billion and $8.62 for the current fiscal year (ending December 2022), indicating a rise of 7.6% and 2.6% year-over-year, respectively. Furthermore, the company’s revenue and EPS for the next fiscal year are expected to grow 3.5% and 2.9% year-over-year to $325.29 billion and $8.87, respectively.
Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 6.2% to close the last trading session at $97.35.
CVS’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Stability and Sentiment. Within the Medical- Drug Stores Industry, it is ranked #1 among four stocks.
Click here to see additional ratings of CVS for Value, Quality, and Momentum.
JNJ shares were trading at $176.20 per share on Monday afternoon, down $0.00 (0.00%). Year-to-date, JNJ has gained 5.03%, versus a -15.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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