Over the past two years, the healthcare industry has witnessed substantial demand due to surging chronic diseases and an aging population worldwide. The COVID-19 pandemic has dramatically impacted the healthcare sector also, resulting in a revolution in digital health technologies. Further, the scaling of virtual health services, including mobile health, telehealth and telemedicine, and health information technology (IT), are expected to contribute largely to the industry’s growth.
Furthermore, increased healthcare expenditure in the United States bodes well for the healthcare industry. According to a Centers for Medicare & Medicaid Services (CMS) report, national health spending is expected to reach $6.80 trillion by 2030. Moreover, the healthcare industry is projected to account for 19.6% of the GDP by 2030. The bullish sentiment surrounding the industry is evident from Health Care Select Sector SPDR’s (XLV) 5.1% gains over the past year.
Against this backdrop, we think it could be wise to invest in the stocks of quality healthcare companies Abbott Laboratories (ABT), Quidel Corporation (QDEL), Medtronic plc (MDT), Fresenius Medical Care AG & Co. KGaA (FMS), and Smith & Nephew plc (SNN). These stocks are currently trading near their 52-week lows but hold solid upside potential.
Click here to checkout our Healthcare Sector Report for 2022
Abbott Laboratories (ABT)
ABT discovers, develops, manufactures, and sells healthcare products worldwide. The Abbott Park, Ill.-based company operates through four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices. It provides generic pharmaceuticals for treating various diseases, laboratory systems, molecular diagnostic systems, point of care systems, rapid diagnostics, lateral flow testing products, pediatric and adult nutritional products, and medical devices.
On May 4, ABT received FDA clearance for its Alinity™ m STI Assay. ABT’s multiplex test runs on its advanced molecular PCR platform, the Alinity™ m system, which detects and differentiates four common sexually transmitted infections (STIs). This new product approval is expected to strengthen the company’s portfolio.
On April 29, ABT launched an upgraded version of its NeuroSphere™ myPath™ digital health app with enhanced functionality that will allow doctors to closely track their patients as they trail Abbott neurostimulation devices to address their chronic pain. This product launch might strengthen the company’s connected care technologies and boost its growth.
Also last month, ABT announced FDA approval for its Aveir™ single-chamber leadless pacemaker for treating patients in the U.S. with slow heart rhythms. This new leadless pacemaker does not require an incision in the chest to implant or leads to deliver the therapy.
In its fiscal year 2022 first quarter, ended March 31, 2022, ABT's net sales increased 13.8% year-over-year to $11.90 billion, while its gross margin improved 15.4% from its year-ago value to $7.03 billion. Its earnings before taxes grew 29.2% year-over-year to $2.79 billion. Its net earnings and earnings per share came in at $3.08 billion and $1.73, respectively, registering a 29.9% and 31.1% respective increase from the prior-year period.
A$4.96 consensus EPS estimate for its fiscal year 2023, ending Dec. 31, 2023, represents a 2.2% improvement from the previous year. The company has an impressive revenue and earnings surprise history; it has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained marginally in price over the past five days to close yesterday’s trading session at $109.71. ABT is currently trading 4.9% above its 52-week low of $104.63, which it hit on May 12, 2022.
ABT's POWR Ratings reflect this promising outlook. It has an overall A grade, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ABT has a grade of A for Growth and Sentiment and B for Stability and Quality. Within the Medical - Devices & Equipment industry, it is ranked #2 of 150 stocks. To see additional POWR Ratings (Value and Momentum) for ABT, click here.
Quidel Corporation (QDEL)
QDEL in San Diego, Calif., develops, manufactures, markets, and sells diagnostic testing solutions for applications in infectious diseases, women’s and general health, cardiology, thyroid, eye health, gastrointestinal diseases, and toxicology worldwide. The company markets its products through a direct sales force and distributors in physician offices, clinical laboratories, hospitals, universities, reference laboratories, retail and urgent care clinics, wellness screening centers, and pharmacies.
Yesterday, QDEL’s stockholders approved the acquisition of Ortho Clinical Diagnostics Holdings plc by QDEL and the subsequent business combination. Under the terms of the agreement by which QDEL will acquire Ortho, QDEL stockholders are expected to own approximately 62% of the combined company. Ortho shareholders are expected to own about 38% of the combined company. The combined company might create and deliver innovative diagnostic solutions to customers and provide value to its shareholders.
QDEL's total revenues increased 167% year-over-year to $1 billion in its fiscal year 2022 first quarter, ended March 31, 2022. Its adjusted gross profit rose 144% year-over-year to $742.95 million. Its adjusted operating income improved 168.3% year-over-year to $639.16 million. In addition, the company’s adjusted net income and adjusted EPS came in at $494.88 million and $11.66, respectively, registering an increase of 259.7% and 166.2% year-over-year.
Analysts expect QDEL’s revenue for its fiscal 2022 second quarter, ending June 30, 2022, to come in at $366.17 million, indicating a 107.3% increase year-over-year. Also, the $3.15 consensus EPS estimate for the same quarter represents a 320.5% rise from the same period last year. QDEL has topped the consensus EPS estimates in three of the trailing four quarters.
Shares of QDEL have gained 3.6% in price over the five days and closed yesterday’s trading session at $98.06. The stock is currently trading 11.4% above its 52-week low of $88.05, which it hit on May 12, 2022.
QDEL's POWR Ratings reflect a promising outlook. The stock has an overall B grade, which equates to Buy in our proprietary rating system.
QDEL has a grade of A for Value, Growth, and Quality. Within the Medical-Diagnostics/Research industry, it is ranked #8 of 50 stocks. To see additional POWR Ratings (Momentum, Stability, and Sentiment) for QDEL, click here.
Fresenius Medical Care AG & Co. KGaA (FMS)
Headquartered in Bad Homburg, Germany, FMS provides dialysis care and related dialysis care services in Germany, North America, and internationally. It offers dialysis treatment, related laboratory and diagnostic services, and dialysis services under contract to hospitals in the United States. It also develops, manufactures, and distributes dialysis products, non-dialysis products, and in-licenses renal pharmaceuticals. It operates more than 4,171 outpatient dialysis clinics in nearly 150 countries.
Last November, FMS unveiled intelligent home dialysis solutions at China International Import Expo (CIIE) in Shanghai, which allows patients with end-stage kidney disease to perform dialysis at home, including the 5008S hemodialysis (HD) machine and a new automated peritoneal dialysis (APD) machine. Fresenius Medical Care’s intelligent DiaSmart therapy data management system (TDMS+) is backed by these machines. These new introductions are expected to extend the company’s global reach and boost revenue streams.
In its fiscal year 2022 first quarter, ended March 31, 2022, FMS' total revenue grew 8% year-over-year to €4.55 billion ($4.74 billion), and its revenue from health care services increased 8.5% year-over-year to €3.61 billion ($3.76 billion). Its gross profit improved 4.2% from its year-ago value to €1.26 billion ($1.31 billion). The company’s cash and cash equivalents and total current assets amounted to €1.17 billion ($1.21 billion) and €8.04 billion ($8.38 billion), respectively, as of March 31.
The $21.20 billion consensus revenue estimate for its fiscal year 2023, ending Dec. 31, 2023, represents 5.7% growth from the previous year. The $2.33 consensus EPS estimate for the same year indicates a 15.4% year-over-year rise.
The stock has plunged 8.7% in price year-to-date and closed yesterday's trading session at $29.78. The stock is currently trading 3.6% above its 52-week low of $28.75, which it hit on March 7, 2022.
FMS’ POWR Ratings reflect a strong outlook. The stock has an overall B rating, which translates to Buy in our POWR Ratings system.
FMS has an A grade for Stability and a B for Quality and Value. It is ranked #14 of 83 stocks in the Medical-Services industry. Click here to see FMS’ ratings for Growth, Sentiment, and Momentum.
Medtronic plc (MDT)
MDT is a global leader in healthcare technology. It develops, manufactures, and sells device-based medical therapies to hospitals, clinicians, physicians, and patients worldwide. The company is headquartered in Dublin, Ireland. It operates through four segments: Cardiovascular Portfolio; Neuroscience Portfolio; Medical-Surgical Portfolio; and Diabetes Operating Unit.
On May 13, MDT received U.S. Food and Drug Administration (FDA) approval for the Onyx Frontier™ drug-eluting stent (DES). With its enhanced deliverability, the Onyx Frontier DES is used to efficiently treat patients with coronary artery disease (CAD). The FDA approval might strengthen MDT’s Coronary business and revenues.
On the same day, MDT acquired Intersect ENT. Through the acquisition, MDT gained PROPEL and SINUVA, which are bioabsorbable steroid-eluting implants for sinus patients. Intersect ENT’s product lines and customer base will further the efforts of MDT to treat patients with chronic rhinosinusitis (CRS). The acquisition is expected to expand the company’s portfolio and boost its profitability.
MDT's non-GAAP operating profit increased 5.5% year-over-year to $2.18 billion in its fiscal 2022 third quarter, ended Jan. 28, 2022. Its non-GAAP income before income taxes improved 6% year-over-year to $2.11 billion. In addition, the company’s non-GAAP net income attributable to MDT and non-GAAP earnings per share came in at $1.85 billion and $1.34, respectively, indicating an increase of 5.3% and 3.9% year-over-year.
Analysts expect MDT's revenue for its fiscal 2022, ending April 30, 2022, to come in at $32.07 billion, representing a 6.5% rise year-over-year. The Street expects the company's EPS for the current year to be $5.66, representing a 27.5% increase year-over-year. It is no surprise that it has surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past five days, the stock has gained 2.9% in price to close yesterday's trading session at $103.81. It is currently trading 5.5% above its 52-week low of $98.38, which it hit on Dec. 20, 2021.
MDT's POWR Ratings reflect a strong outlook. The stock has an overall B rating, which translates to Buy in our POWR Ratings system.
MDT has a grade of B for Stability. It is ranked #12 of 150 stocks in the Medical - Devices & Equipment industry. Click here to see MDT's POWR Ratings for Momentum, Sentiment, Value, Growth, and Quality.
Smith & Nephew plc (SNN)
Headquartered in Watford, U.K., SNN develops, manufactures, markets, and sells medical devices worldwide. The company provides knee implant products, hip implants, and trauma and extremities products. In addition, it offers sports medicine joint repair products, arthroscopic enabling technologies, mechanical tissue resection devices, and hand instruments. Further, it offers advanced wound care products, regenerative medicine products, and advanced wound devices. It serves healthcare providers.
In March, SNN showcased its latest innovations for Orthopaedic Reconstruction and Robotics during the American Academy of Orthopaedic Surgeons 2022 annual meeting held in Chicago. The company introduced cementless knee implants, ABLE™ Advanced Anterior Approach for Total Hip Arthroplasty (THA), and CORI™ Surgical System, a robotics platform in the orthopedic knee market. These advancements are expected to boost the company’s business growth and expand its global footprint.
In its fiscal year 2022 first quarter, ended April 2, 2022, SNN's revenue increased 3.3% year-over-year to $1.31 billion. The revenue from Sports Medicine & ENT grew 6.1% year-over-year to $396 million, and revenue from Advanced Wound Management rose 5.1% from its year-ago value to $369 million.
SNN stock has improved marginally over the past month and closed yesterday’s trading session at $31.72. It is currently trading 7.9% above its 52-week low of $29.40, which it hit on May 12, 2022.
SNN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which equates to a Buy in our proprietary rating system.
SNN has a B grade for Value and Stability. Within the Medical-Devices & Equipment industry, it is ranked #7 of 150 stocks. To see additional POWR Ratings (Sentiment, Growth, Quality, and Momentum) for SNN, click here.
Click here to checkout our Healthcare Sector Report for 2022
ABT shares were trading at $114.16 per share on Tuesday morning, up $4.45 (+4.06%). Year-to-date, ABT has declined -18.28%, versus a -14.43% 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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