The growth of the healthcare services market is expected to be driven by factors such as the rising elderly population, accelerated economic growth, technological innovations, changing lifestyles, and improved survival rates and living standards.
Given this backdrop, it could be wise to consider investing in fundamentally strong healthcare stocks, UnitedHealth Group Incorporated (UNH), Abbott Laboratories (ABT), and Medtronic plc (MDT).
The growing elderly population is increasing the need for long-term care services, including medical devices and consumables. Meanwhile, economic growth and lifestyle shifts are contributing to a rise in healthcare expenditures, especially on medical devices and consumables. The healthcare services market is forecast to grow at a CAGR of 8.7% by 2028.
Additionally, artificial intelligence revolutionized the healthcare domain by impacting its several divisions and providing assistance in surgeries, diagnostics, personalized treatment plans, etc. AI-powered tools and techniques help to improve radiology, medical imaging, and drug discovery and development.
Given these favorable industry trends, let’s look at the fundamentals of three healthcare stocks.
UnitedHealth Group Incorporated (UNH)
UNH operates as a diversified healthcare company in the United States. The company operates through four segments: UnitedHealthcare; Optum Health; Optum Insight; and Optum Rx.
In terms of the trailing-12-month EBIT margin, UNH’s 8.07% is 215.7% higher than the 2.56% industry average. Likewise, its 3.40% trailing-12-month levered FCF margin is 47.5% higher than the 2.31% industry average. Its 8.07% trailing-12-month EBIT margin is 215.7% higher than the 2.56% industry average.
During the fourth quarter ended December 31, 2024, UNH’s total revenues increased by 6.8% year-over-year to $100.81 billion. The company’s net earnings were $5.78 billion, or $5.98 per share, up 1.9% and 2.6% year-over-year, respectively.
The consensus revenue estimate of $111.64 billion for the fiscal first quarter (ending March 2025) represents an 11.9% increase year-over-year. The company expects its EPS to increase 5.6% year-over-year to $7.29. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has surged 7.4%, closing the last trading session at $548.18.
UNH’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
UNH has a B grade for Stability, Quality, and Growth. It is ranked #3 out of 10 stocks in the Medical - Health Insurance industry. Click here to see the additional ratings for UNH (Value, Momentum, and Sentiment).
Abbott Laboratories (ABT)
ABT discovers, develops, manufactures, and sells healthcare products worldwide. It operates in four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices.
In terms of the trailing-12-month levered FCF margin, ABT’s 15.24% is 573.4% higher than the 2.31% industry average. Its 0.56x trailing-12-month asset turnover ratio is 36.4% higher than the 0.41x industry average. Similarly, the stock’s 16.82% trailing-12-month EBIT margin is 558.1% higher than the 2.56% industry average.
For the fourth quarter of 2024, which ended on December 31, 2024, ABT’s revenue increased 7.2% year-over-year to $10.97 billion. Its net earnings increased considerably year-over-year to $9.23 billion and $5.27 per share, respectively.
Street expects ABT’s revenue and EPS for the fiscal first quarter (ending March 2025) to increase 4.2% and 8.6% year-over-year to $10.38 billion and $1.06, respectively. Moreover, it beat the revenue and EPS estimates in three of the trailing four quarters, which is promising.
Shares of ABT have gained 14.6% over the past year to close the last trading session at $128.45.
ABT’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
ABT has an A grade for Stability and a B for Quality. It is ranked #7 out of 131 stocks in the Medical - Devices & Equipment industry.
In addition to the POWR Ratings we’ve stated above, we also have ABT ratings for Momentum, Growth, Value, and Sentiment. Get all ABT ratings here.
Medtronic plc (MDT)
MDT develops, manufactures, and sells device-based medical therapies to healthcare systems, physicians, clinicians, and patients worldwide.
On January 13, 2025, MDT announced that the Centers for Medicare & Medicaid Services (CMS) is opening a national coverage analysis (NCA) on renal denervation, a process that will allow the agency to review and develop a national Medicare coverage policy for renal denervation procedures for patients with hypertension.
In terms of the trailing-12-month levered FCF margin, MDT’s 15.19% is 487.7% higher than the 2.58% industry average. Its 65.40% trailing-12-month gross profit margin is 12.8% higher than the 58% industry average. Similarly, the stock’s 19.77% trailing-12-month EBIT margin is 658.1% higher than the 2.61% industry average.
For the second quarter that ended on October 25, 2024, MDT’s net sales rose 4.9% year-over-year to $8.40 billion. Its net income grew 12.8% from the year-ago value to $1.28 billion. In addition, the company’s EPS stood at $1.27 billion, or $0.99 per share.
The consensus revenue estimate of $8.33 billion for the fiscal third quarter (ending January 2025) represents a 2.9% increase year-over-year. The consensus EPS estimate of $1.36 for the same quarter indicates a 4.6% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has surged 11.1%, closing the last trading session at $90.53.
MDT’s POWR Ratings reflect its bright outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
MDT has a B grade for Stability and Value. It is ranked #27 out of 131 stocks in the Medical - Devices & Equipment industry. Click here to see the additional ratings for MDT (Growth, Sentiment, Momentum, and Quality).
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UNH shares were trading at $547.16 per share on Tuesday afternoon, down $1.02 (-0.19%). Year-to-date, UNH has gained 8.16%, versus a 2.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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