A confluence of the widespread adoption of digital innovations, accelerating developments in therapeutics, and rising healthcare spending should propel the healthcare sector’s growth. Therefore, we think the recent price dips in fundamentally sound healthcare stocks Pfizer (PFE), Abbott Laboratories (ABT), and Agilent Technologies (A) provide a perfect buying opportunity. So, read on.
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An aging population, improvements in drugs and therapeutics to treat chronic diseases, the integration of advanced technologies, and rising healthcare spending should propel the healthcare sector’s growth. Furthermore, the growing trend of preventive healthcare, which has been accelerated by the COVID-19 pandemic, bodes well for healthcare providers.
According to a Monthly National Health Spending report, expenditure increased 6.3% year-over-year to $4.09 trillion in September 2021. Also, with high GDP growth, health spending now accounts for nearly 17.5% of GDP. The global healthcare and pharma market is expected to reach $1.58 trillion by 2027, registering a 4% CAGR. And investors’ interest in the healthcare sector is evident in the Health Care Select Sector SPDR Fund’s (XLV) 16.8% gains year-to-date.
Therefore, fundamentally strong healthcare stocks Pfizer Inc. (PFE), Abbott Laboratories (ABT), and Agilent Technologies, Inc. (A), which have suffered price declines lately, could be ideal picks now.
Pfizer Inc. (PFE)
New York City-based PFE is a global biopharmaceutical company that discovers, develops, manufactures, and distributes medicines and vaccines in a wide range of therapeutic areas. The company markets its products under the Eliquis, Xtandi, Medrol, Premarin family, and various other brands. In addition, PFE is involved in the contract manufacturing business and serves retailers, hospitals, government agencies, and disease control and prevention centers.
This month, PFE acquired Trillium Therapeutics, a clinical-stage immuno-oncology company that develops therapies to treat cancer. Through this acquisition, PFE could enhance its oncology portfolio with the addition of next-generation investigational immuno-therapeutics for hematological malignancies.
PFE’s revenues increased 134.4% year-over-year to $24.09 billion in its fiscal third quarter, ended October 3, 2021. The company’s adjusted income grew 132.7% from its year-ago value to $7.69 billion. Its adjusted EPS rose 127.1% from the prior-year quarter to $1.34. Also, the company’s revenues under the Oncology segment increased 11.7% year-over-year to $3.09 billion.
Analysts expect PFE’s revenue for its fiscal year 2022 to be $782.07 billion, representing 6.4% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Its EPS is expected to grow 16.3% next year. The stock has gained 50.6% in price over the past nine months. It is currently trading 3.3% below its 52-week high of $52.84, which it hit on November 19, 2021.
PFE’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 assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Growth, and a B grade for Value and Quality. We have also graded PFE for Stability, Sentiment, and Momentum. Click here to access all PFE’s ratings.
PFE is ranked #10 of 198 stocks in the Medical – Pharmaceuticals industry.
Abbott Laboratories (ABT)
ABT discovers, develops, manufactures, and sells a diversified line of health care products. The Abbott Park, Ill.-based company operates through four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices. Its products include a line of rhythm management, electrophysiology, heart devices, diabetes care products, and neuromodulation devices. ABT markets its products under PediaSure, Ensure, FreeStyle, Glucerna, and various other brands.
This month, ABT launched Similac 360 Total Care, the company’s next generation of infant formula with HMOs. Similac 360 Total Care contains a blend of five different HMOs designed to provide nutrition to support an infant’s health and development. During the third quarter, ended September 30, 2021, ABT’s net sales increased 23.4% year-over-year to $10.93 billion. The company’s operating earnings grew 70.3% from their year-ago value to $2.55 billion. Its net earnings rose 70.5% from the prior-year quarter to $2.1 billion. Also, the company’s EPS increased 42.9% year-over-year to $1.4.
ABT’s revenue is expected to increase 21.8% year-over-year to $42.16 billion in its fiscal year 2021. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the four trailing quarters. Its EPS is expected to increase 38.9% in the current year. The stock has gained 13.7% in price year-to-date and is trading 5.4% below its 52-week high of $131.6, which it hit on November 16, 2021.
ABT’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has a B grade for Sentiment, Quality, and Stability.
Agilent Technologies, Inc. (A)
Incorporated in 1999, A is a global provider of life sciences, diagnostics, and applied chemical solutions. The Santa Clara, Calif., company provides laboratories with instruments, services, consumables, applications, and expertise. A operates through The Life Sciences and Applied Markets; The Diagnostics and Genomics; The Agilent CrossLab segments.
Last month, A announced that its PD-L1 IHC 22C3 pharmDx could be used to identify TNBC patients for treatment with KEYTRUDA in Europe. KEYTRUDA is a humanized monoclonal antibody that enhances the ability of the immune system to detect and fight tumor cells. By expanding PD-L1 IHC 22C3 pharmDx, A could strengthen its role in developing companion diagnostics for targeted therapies.
A’s net revenue increased 11.9% year-over-year to $1.66 billion for its fiscal fourth quarter, ended October 31, 2021. The company’s income from operations grew 32.1% from its year-ago value to $395 million. Its net income rose 99.1% from the prior-year quarter to $442 million. Also, the company’s EPS increased 104.2% year-over-year to $1.45.
Analysts expect A’s revenue to increase 7.1% year-over-year to $6.02 billion in its fiscal 2022. The company has beaten the consensus EPS in each of the trailing four quarters. Its EPS is expected to increase 11.7% in the current year. A’s stock price has surged 37.9% in price over the past year. It is currently trading 13.8% below its 52-week high of $179.57, which it hit on September 3, 2021.
It is no surprise that A has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has a B grade for Growth, Sentiment, Stability, and Value.
Note that A is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
PFE shares fell $0.21 (-0.41%) in premarket trading Wednesday. Year-to-date, PFE has gained 43.80%, versus a 26.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master’s degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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