Bullish market sentiment driven by the fast-paced vaccination drive and strong economic revival pushed benchmark indices to hit record highs in the first half of 2021. Although the major benchmark indexes have dipped slightly over the past week, analysts don’t expect the downtrend to continue for long. However, concerns over high inflation will likely sustain market volatility for some time.
The healthcare industry has been one of the major beneficiaries of market optimism over the past few months. Companies in this space have invested heavily in research and development to strengthen their positions in the market. According to LBMC’s fourth annual Business Outlook Survey Report, 92% of healthcare organizations expect substantial revenue growth in 2021.
Given the rising demand for healthcare services worldwide and robust tech integration in the industry, we think betting on large-cap stocks Abbott Laboratories (ABT), Thermo Fisher Scientific Inc. (TMO), and Medtronic plc (MDT), which possess solid growth attributes, could be rewarding.
Click here to checkout our Healthcare Sector Report for 2021
Abbott Laboratories (ABT)
ABT in Abbott Park, Ill., develops, manufactures, and sells health care products globally. The company operates through four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices. It has a $211.07 billion market capitalization.
On June 28, ABT announced the CE Mark approval for its Panbio™ COVID-19 Antigen Self-Test for sale directly to consumers for use in detecting the SARS-CoV-2 virus. Amid rising concerns about the spread of a new covid variants, this product should be widely demanded for fast and reliable self-testing throughout Europe.
The company has an impressive growth history. ABT’s EBIT has improved at a 32,1% CAGR over the past three years, while its net income increased at a 129.1% CAGR over the period. Its EPS has improved at a 148% CAGR over the past three years.
ABT’s net sales increased 35.3% year-over-year to $10.46 billion in its fiscal first quarter ended March 31. Its operating earnings grew 178% from its year-ago value to $2.11 billion, while its net earnings improved 217.8% year-over-year to $1.79 billion. The company’s EPS increased 222.6% year-over-year to $1.00.
Analysts expect ABT’s revenues to increase 13.5% year-over-year to $39.28 billion in the current year. A $4.36 consensus EPS estimate for the current year represents a 19.5% rise versus last year. ABT has an impressive earnings surprise history also; it beat the consensus EPS estimates in each of the trailing four quarters. Shares of ABT have gained 21.9% over the past year and 7.3% year-to-date.
It is no surprise that ABT has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Growth, and B for Value, Stability, Sentiment, and Quality. Among the 220 stocks in the Medical - Pharmaceuticals industry, ABT is ranked #7.
To see more of ABT’s component grades, click here.
Thermo Fisher Scientific Inc. (TMO)
With a $205.01 billion market capitalization, Waltham, Mass.-based TMO is the world’s leader in service science. The company operates through four segments: Life Sciences Solutions; Analytical Instruments; Specialty Diagnostics; and Laboratory Products and Services.
On July 15, TMO unveiled its new cGMP plasmid DNA manufacturing facility in California. This should allow the company to expand its capabilities significantly to meet the rapidly growing demand for plasmid DNA-based therapies and vital mRNA-based vaccines.
On July 7, TMO collaborated with Ortho Clinical Diagnostics to provide Thermo Scientific MAS Quality Controls with Ortho’s VITROS Analyzers. This is on par with its goal to provide better efficiency and consolidation of quality controls for laboratories utilizing its solutions.
TMO’s net income improved at a 52.1% CAGR over the past three years, while its levered free cash flow increased at a 43.1% CAGR over this period. Its EPS has improved at a 52.3% CAGR over the past three years. The company holds immense growth potential.
TMO’s revenue increased 59% year-over-year to $9.91 billion in its fiscal first quarter, which ended April 3. Its net income stood at $2.34 billion, up 196.6% from the same period last year. Its operating income grew 236.5% from its year-ago value to $3.05 billion. The company’s EPS increased 198% year-over-year to $5.88.
A $35.66 billion consensus revenue estimate n for the current year indicates a 10.7% increase year-over-year. The Street expects the company’s EPS to rise 13.1% from the prior year to $22.12 in the current year. TMO also surpassed the consensus EPS estimates in each of the trailing four quarters. TMO gained 32.5% over the past year. The stock has gained 11.6% year-to-date.
TMO has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. TMO has an A grade for Growth. It is ranked #9 among the 55 stocks in the Medical - Diagnostics/Research industry.
Click here to view additional TMO ratings for Momentum, Value, Quality, Sentiment, and Stability.
Medtronic plc (MDT)
MDT develops, manufactures, and sells device-based medical therapies to hospitals, physicians, clinicians, and patients across 150 countries. The company operates through four segments: Cardiovascular Portfolio; Neuroscience Portfolio; Medical-Surgical Portfolio; and Diabetes Operating Unit. It has a $164.96 billion market capitalization. MDT is based in Fridley, Minn.
On June 22, MDT announced the first patient procedure with its Medtronic Hugo™ robotic-assisted surgery (RAS) system. This marks a step forward in its minimally invasive surgery (MIS) initiative and its commitment to technological advancement in healthcare.
On June 10, MDT the FDA approved its next-generation recharge-free spinal cord stimulation platform, which is now part of this market's strongest and broadest overall portfolio.
MDT’s net income has improved at a 5.1% CAGR over the past three years, while EPS has increased at a 5.4% CAGR over this period. Its EPS is also expected to increase at a 10.9% rate per annum over the next five years.
MDT’s net sales increased 36.5% year-over-year to $8.19 billion in its fiscal first quarter ended April 30. Its operating profit grew 406.9% from its year-ago value to $1.61 billion, while its net income improved 113.6% year-over-year to $1.37 billion over the period. The company’s EPS increased 108.3% year-over-year to $1.00.
The $33.2 billion consensus revenue estimate for the current year represents a 10.3% improvement from the last year. Analysts expect the company’s EPS to come in at $5.68 in the current year, indicating a 27.9% rise year-over-year. Moreover, MDT surpassed the Street’s EPS estimates in each of the trailing four quarters.
MDT has gained 31.4% over the past year. Over the past six months, the stock has gained 7.7% to close yesterday’s trading session at $122.75.
MDT has an overall B rating, which equates to Buy in our proprietary rating system. MDT has an A grade for Growth, and B for Stability. Among the 184 stocks in the Medical - Devices & Equipment industry, MDT is ranked #28.
Beyond what we’ve stated above, we have also rated MDT for Value, Sentiment, Momentum, and Quality. Click here to view all MDT ratings.
Click here to checkout our Healthcare Sector Report for 2021
ABT shares were trading at $118.73 per share on Tuesday afternoon, down $0.06 (-0.05%). Year-to-date, ABT has gained 9.69%, versus a 16.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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