In about a month, many consumers will choose or make adjustments to their healthcare plans for 2025. It's a good reminder of the evergreen nature of this sector. The reality is that there's more need for health spending today.
That's why many government and industry analysts are forecasting healthcare spending growth to command a 19.7% share of gross domestic product (GDP) by 2032. That means growth in healthcare spending will exceed GDP.
If you're an investor, this is an opportunity hiding in plain sight. No matter what direction inflation or interest rates move, those who need to will continue to spend on healthcare services. Your job is to find the companies most likely to benefit.
In this special presentation, however, we're looking at seven healthcare stocks that are particularly good options as interest rate cuts make their way into the economy. These are companies that analysts project to have solid earnings growth and attractive valuations.
Quick Links
- UnitedHealth Group
- AbbVie
- Merck & Co.
- Novartis
- Intuitive Surgical
- Jazz Pharmaceuticals
- Viking Therapeutics
#1 - UnitedHealth Group (NYSE:UNH)
UnitedHealth Group Inc. (NYSE: UNH) is one of the largest healthcare stocks by market capitalization. The company is best known as a leader in managed care, but it also owns the Optum network, which helps deliver analytics-based, affordable healthcare.
UNH stock has also been one of the best performers in the past 10 years, with a total return of over 685%. However, past performance isn’t a reliable indicator of future growth. There’s a reason why analysts are still bullish on the company. UnitedHealth recently acquired LHC Group, which will expand the company’s reach into the growing home healthcare business.
Anyone who has managed the needs of an elderly parent knows this is an area of the economy that will get larger, not smaller. This acquisition positions UnitedHealth to be a significant player in the space.
Plus, investors get a dividend that has been increasing at an average annual rate of over 14% in the last three years - more than four times the current rate of inflation.
About UnitedHealth Group
UnitedHealth Group Incorporated operates as a diversified health care company in the United States. The company operates through four segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. The UnitedHealthcare segment offers consumer-oriented health benefit plans and services for national employers, public sector employers, mid-sized employers, small businesses, and individuals; health care coverage, and health and well-being services to individuals age 50 and older addressing their needs; Medicaid plans, children's health insurance and health care programs; and health and dental benefits, and hospital and clinical services, as well as health care benefits products and services to state programs caring for the economically disadvantaged, medically underserved, and those without the benefit of employer-funded health care coverage.
Read More - Current Price
- $600.50
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 19 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $615.53 (2.5% Upside)
#2 - AbbVie (NYSE:ABBV)
AbbVie Inc. (NYSE: ABBV) is another large-cap healthcare company that offers investors the opportunity for both growth and income. The stock is up about 23% in 2024. But most of that growth has occurred since its second quarter earnings report. Investors can see that Skyrizi and Rinvoq give AbbVie a path to offset biosimilar competition for its Humira drug.
Another potential catalyst is the company’s acquisition of Cervel Therapeutics. This will expand the company’s pipeline, which is already robust in neuroscience oncology, including areas like migraine and Parkinson’s disease.
Over the last five years, ABBV stock has delivered a total return of 154.72%. A significant part of that is due to the company’s dividend, which currently has a 3.25% yield and has grown at an annualized rate of 7.84% in the last three years. The dividend king has also increased that dividend for 52 consecutive years.
About AbbVie
AbbVie Inc discovers, develops, manufactures, and sells pharmaceuticals worldwide. The company offers Humira, an injection for autoimmune and intestinal Behçet's diseases, and pyoderma gangrenosum; Skyrizi to treat moderate to severe plaque psoriasis, psoriatic disease, and Crohn's disease; Rinvoq to treat rheumatoid and psoriatic arthritis, ankylosing spondylitis, atopic dermatitis, axial spondyloarthropathy, ulcerative colitis, and Crohn's disease; Imbruvica for the treatment of adult patients with blood cancers; Epkinly to treat lymphoma; Elahere to treat cancer; and Venclexta/Venclyxto to treat blood cancers.
Read More - Current Price
- $167.74
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $203.37 (21.2% Upside)
#3 - Merck & Co. (NYSE:MRK)
Merck & Co., Inc. (NYSE: MRK) has been underperforming the market in the last 12 months. The stock is only up 7% in the last 12 months and only 4% in 2024. That's surprising because Merck flipped the script on year-over-year earnings in its most recent quarter. The company reported earnings per share (EPS) of $2.28, which was significantly larger than the negative 2.06 EPS it reported in the same quarter in 2023.
One issue the company faces is its dependence on two drugs in its portfolio: Keytruda and Gardisil. Both drugs are showing slowing growth, and Keytruda recently failed a clinical-stage trial that would have expanded its label for a type of colorectal cancer. This came after the company discontinued testing on a combination of Keytruda for skin and lung cancers.
That hasn’t dampened the enthusiasm of analysts who still have a Moderate Buy rating on MRK stock. Part of that enthusiasm may come from its partnership with Moderna Inc. (NASDAQ: MRNA). The companies recently announced positive Phase 3 clinical trial data for the drug, which may be launched in 2025.
About Merck & Co., Inc.
Merck & Co, Inc operates as a healthcare company worldwide. It operates through two segments, Pharmaceutical and Animal Health. The Pharmaceutical segment offers human health pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular, and diabetes under the Keytruda, Bridion, Adempas, Lagevrio, Belsomra, Simponi, and Januvia brands, as well as vaccine products consisting of preventive pediatric, adolescent, and adult vaccines under the Gardasil/Gardasil 9, ProQuad, M-M-R II, Varivax, RotaTeq, Live Oral, Vaxneuvance, Pneumovax 23, and Vaqta names.
Read More - Current Price
- $97.43
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $130.86 (34.3% Upside)
#4 - Novartis (NYSE:NVS)
Novartis AG (NYSE: NVS) stock is showing modest growth in 2024. Shares are up 14% for the year and have risen a brisk 21% in the six months ending September 26, 2024.
The thesis for Novartis is similar to the other biopharmaceutical companies. It has several commercial drugs facing patent expiration. But it also has a strong pipeline. One of the company’s most exciting treatments in late-stage clinical trials is Kesmipta (ofatumumab), which is a treatment for patients with relapsing multiple sclerosis (MS). The company recently received positive clinical data showing that most patients showed no disability progression for up to six years.
NVS stock hasn’t been a blockbuster stock with a return of around 37% in the last five years. The company’s own internal forecasting suggests investors should expect comparable growth in the next year or so. But in a market that may remain volatile, Novartis is likely to deliver a slow, steady return that should reward less risk-tolerant investors.
About Novartis
Novartis AG engages in the research, development, manufacture, and marketing of healthcare products in Switzerland and internationally. The company offers prescription medicines for patients and physicians. It focuses on therapeutic areas, such as cardiovascular, renal and metabolic, immunology, neuroscience, and oncology, as well as ophthalmology and hematology.
Read More - Current Price
- $103.09
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 8 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $121.50 (17.9% Upside)
#5 - Intuitive Surgical (NASDAQ:ISRG)
Intuitive Surgical Inc. (NASDAQ: ISRG) gives investors a different option for investing in large-cap healthcare stocks. In fact, some investors may feel that Intuitive Surgical is more of a play on technology/artificial intelligence stocks as the company is best known for its da Vinci robotic surgical system.
Revenue for its da Vinci systems grew 17% year-over-year. And the news gets even better because every sale of its da Vinci system increases the company’s recurring revenue base. Total revenue in its most recent quarter was $2.01 billion. That revenue is also boosting the company’s bottom line.
But is it enough to justify ISRG stock’s premium valuation which is currently 93x earnings? That’s a hefty premium to pay. But analysts may be sharpening their pencils and rethinking their calculations as lower interest rates may generate more interest from customers who have been hesitant to finance a da Vinci system. Since the company’s July earnings report, several analysts give ISRG stock a price target well above its consensus estimate.
About Intuitive Surgical
Intuitive Surgical, Inc develops, manufactures, and markets products that enable physicians and healthcare providers to enhance the quality of and access to minimally invasive care in the United States and internationally. The company offers the da Vinci Surgical System that enables complex surgery using a minimally invasive approach; and Ion endoluminal system, which extends its commercial offerings beyond surgery into diagnostic procedures enabling minimally invasive biopsies in the lung.
Read More - Current Price
- $541.82
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 4 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $524.61 (3.2% Downside)
#6 - Jazz Pharmaceuticals (NASDAQ:JAZZ)
If you’re a fan of mid-cap stocks, Jazz Pharmaceuticals plc (NASDAQ: JAZZ) is one you’ll want to watch. JAZZ stock is down 10.9% in 2024, but analysts give the stock a Moderate Buy rating with a $173.07 consensus price target that would give shareholders a 58% upside.
The company is best known for its seizure drug, Epidiolex. However, the reason for the bullish sentiment is the company’s clinical trial drug, Zanidatamab, which targets HER2-positiv cancers. The drug is in Phase 3 trials and may still receive FDA approval in 2024. The company is forecasting $2 billion in annual sales when the drug achieves peak performance. That would add about 50% to the company’s 2023 topline.
In the short term, long-term investors should pay attention to short interest on JAZZ stock, which is up a whopping 73% in September 2024. However, if the stock does pull back, that could be an enticing buying opportunity for patient investors.
About Jazz Pharmaceuticals
Jazz Pharmaceuticals plc identifies, develops, and commercializes pharmaceutical products for unmet medical needs in the United States, Europe, and internationally. The company offers Xywav for cataplexy or excessive daytime sleepiness (EDS) with narcolepsy and idiopathic hypersomnia; Xyrem to treat cataplexy or EDS with narcolepsy; Epidiolex for seizures associated with Lennox-Gastaut and Dravet syndromes, or tuberous sclerosis complex; Zepzelca to treat metastatic small cell lung cancer, or with disease progression on or after platinum-based chemotherapy; Rylaze for acute lymphoblastic leukemia or lymphoblastic lymphoma; Enrylaze to treat acute lymphoblastic leukemia and lymphoblastic lymphoma; Defitelio to treat severe hepatic veno-occlusive disease; and Vyxeos for newly-diagnosed therapy-related acute myeloid leukemia.
Read More - Current Price
- $119.24
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $175.53 (47.2% Upside)
#7 - Viking Therapeutics (NASDAQ:VKTX)
No list of healthcare stocks to buy would be complete without including at least one company that is part of the growing GLP-1 movement. However, if you’re looking for good value, you may not find it with the two leading companies, Eli Lilly & Co. (NYSE: LLY) and Novo Nordisk A/S (NYSE: NVO), where investors are paying premium prices for shares
That’s why you may want to consider Viking Therapeutics Inc. (NASDAQ: VKTX). The pre-revenue company’s stock is up more than 243% in 2024 as investors anticipate clinical approval of its VK2735 obesity drug. The company is developing an injectable and oral version of VK2735, both of which are in Phase 2 trials.
However, while VK2735 may garner the most headlines, it’s only one part of the company's deep pipeline that includes potential treatments for non-alcoholic steatohepatitis (NASH), hip fracture recovery, and type-2 diabetes (T2D).
That's why, despite the strong growth in VKTX stock in 2024, analysts still give the stock a consensus price target of $108.60, which suggests there could be a 73% upside for risk-tolerant investors.
About Viking Therapeutics
Viking Therapeutics, Inc, a clinical-stage biopharmaceutical company, focuses on the development of novel therapies for metabolic and endocrine disorders. The company's lead drug candidate is VK2809, an orally available tissue and receptor-subtype selective agonist of the thyroid hormone receptor beta (TRß), which is in Phase IIb clinical trials to treat patients with biopsy-confirmed non-alcoholic steatohepatitis, as well as NAFLD.
Read More - Current Price
- $51.53
- Consensus Rating
- Buy
- Ratings Breakdown
- 11 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $109.80 (113.1% Upside)
As this presentation shows, you won't lack choices if you're looking to invest in healthcare stocks. Whether it's in research and development, medical procedures, health insurance, or rehabilitation services, there are many quality names for you to consider.
But what if none of these companies is attractive to you? The MarketBeat stock screener can help you find what you're looking for. You can sort medical stocks by market cap, projected earnings growth, dividend yield, current and forward P/E ratios, and so much more. And when you find a stock you like, you can add it to your watchlist on My MarketBeat so you'll never miss an update.
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