The healthcare industry seems set to experience tremendous waves of investment and innovation in the foreseeable future. The U.S. government is providing more than $266 million from the American Rescue Plan to expand the community and public health workforce.
Moreover, President Biden is set to sign the Consolidated Appropriations Act of 2023. The omnibus package will increase funding for the U.S. Department of Health and Human Services (HHS) to $120.70 billion. Also, the National Institutes of Health (NIH) will receive $47.5 billion to boost investments in Alzheimer’s disease, cancer, and health disparities research.
The introduction of wireless technologies in the digital architecture of hospitals is further bolstering the industry. Meanwhile, the convergence of the COVID-19 pandemic and burgeoning 5G networks has resulted in an unprecedented expansion of telemedicine by addressing the unequal distribution of resources and lowering the need for rural communities to travel to major centers for treatments.
Revenue for the healthcare segment is projected to reach $63.90 billion in 2023 and is expected to grow at a CAGR of 10.15% to reach $94.07 billion by 2027.
Given the industry’s promising growth prospects, investing in fundamentally strong healthcare stocks AbbVie Inc. (ABBV) and Cardinal Health, Inc. (CAH) could be wise.
AbbVie Inc. (ABBV)
ABBV is a global biopharmaceutical firm that researches, develops, manufactures, and sells pharmaceuticals worldwide. It offers products in numerous therapeutic categories, including eye care, women’s health, neurology, aesthetics, and immunology.
On December 16, ABBV announced the U.S. Food and Drug Administration’s (FDA) approval of VRAYLAR® as an adjunctive therapy to antidepressants for treating major depressive disorder in adults. Due to the unsatisfactory results of conventional antidepressant therapy, ABBV may capitalize on introducing VRAYLAR as a viable supplementary treatment alternative with a well-established safety profile.
On December 6, ABBV and HotSpot Therapeutics, Inc., a biotechnology firm pioneering the discovery and development of small molecule allosteric medicines for the treatment of cancer and autoimmune illnesses, announced an exclusive partnership and option to license agreement for HotSpot’s discovery-stage IRF5 program.
In addition to strengthening ABBV’s strong immunology pipeline, this partnership with HotSpot will provide patients with severe autoimmune disorders with a new target class of modulators.
For the fiscal 2022 third quarter ended September 30, ABBV’s net revenues increased 3.3% year-over-year to $14.81 billion, and its operating earnings grew 6.9% from the year-ago value to $4.60 billion. The company’s net earnings rose 24.3% from the prior-year quarter to $3.95 billion, and its adjusted EPS stood at $3.66, up 29.3% year-over-year.
The company has raised its dividends for nine consecutive years. It pays a $5.92 per share dividend annually, which translates to a 3.66% yield on the current price. ABBV’s dividend payments have grown at a CAGR of 17.3% over the past five years, and its four-year average dividend yield is 4.63%.
The consensus EPS estimate of $13.84 for the current fiscal year (ending December 2022) indicates a 9% year-over-year improvement. Likewise, the consensus revenue estimate of $58.30 billion for the same year indicates a rise of 3.9% from the previous year. Moreover, the company has an impressive earnings surprise history as it surpassed the consensus EPS estimates in all four trailing quarters.
The stock has gained 2.4% over the past month and 18.9% over the past year to close the last trading session at $161.61.
ABBV’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Growth. Within the Medical-Pharmaceuticals industry, it is ranked #11 of 162 stocks.
Beyond what we stated above, we also have ABBV’s ratings for Stability, Value, Sentiment, and Momentum. Get all ABBV ratings here.
Cardinal Health, Inc. (CAH)
CAH is a provider of integrated healthcare services and solutions. It offers customized solutions for healthcare organizations like hospitals, pharmacies, ambulatory surgery facilities, clinical laboratories, and patients receiving care at home. The company operates through two segments, Pharmaceutical and Medical.
On November 15, CAH launched Velocare, a supply chain network and last-mile fulfillment solution that can deliver vital goods and services needed for hospital-level care at home to patients in a couple of hours. With the complexity of supply chain logistics being one of the major challenges to health systems, this alliance will transform patient care delivery.
With the Velocare pilot, CAH will demonstrate its capacity to function and expand within the changing hospital-at-home paradigm and advance the concept of care anywhere. Additionally, the collaboration will increase scalability and effectiveness, ultimately leading to better patient results.
For the fiscal 2023 first quarter ended September 30, 2022, CAH’s revenues increased 13% year-over-year to $49.60 billion. Revenue for the pharmaceutical segment rose 15% year-over-year to $45.80 billion, while profit for the same segment increased 6% from the year-ago value to $431 million.
On November 8, CAH’s Board of Directors approved a quarterly dividend of $0.4957 per share from the company’s capital surplus, payable on January 15, 2023, to shareholders of record at the close of business on January 3, 2023.
The company has raised its dividends for 28 consecutive years and pays a $1.98 per share dividend annually, which translates to a 2.58% yield on the current price. Its four-year average dividend yield is 3.64%
Analysts expect CAH’s EPS for the current fiscal year (ending June 2023) to increase 5.2% year-over-year to $5.32. Moreover, the company’s revenue for the same year is expected to grow 10.8% from the prior year to $201.03 billion. Furthermore, the company’s EPS and revenue for the next fiscal year are expected to grow 17.1% and 6.1% year-over-year to $6.23 and $213.37 billion, respectively.
The stock has gained 47.1% over the past six months to close the last trading session at $76.87.
CAH’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Growth and Value. Within the Medical – Services industry, it ranks #3 of 78 stocks.
Beyond what we stated above, we also have CAH’s ratings for Momentum, Stability, Sentiment, and Quality. Get all CAH ratings here.
ABBV shares rose $0.57 (+0.35%) in premarket trading Tuesday. Year-to-date, ABBV has declined 0.00%, versus a 0.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal’s passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor’s degree in finance and is pursuing the CFA program.
She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More…
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