Beyond Pills: 3 Non-Pharma Healthcare Stocks for Healthy Gains
When you consider healthcare stocks, do you automatically think of pharmaceutical companies? Most people do. However, some of the most significant gains over the long haul are often non-pharma healthcare stocks.
In September 2022, Barron’s asked prominent portfolio managers about the emerging themes in healthcare. Wellington Management portfolio manager Ann Gallo mentioned utilization as a big trend, benefiting healthcare facilities and medical device manufacturers. Other non-pharma themes included digital healthcare, managed care, and medical services.
The four panelists brought together by Barron’s listed some of their favorite healthcare picks. But we are going to delve into three alternative healthcare investments unrelated to the pharmaceutical industry. Each name will have share prices up in 2023 and rated Overweight or better by the analysts covering each stock.
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Becton Dickenson (BDX)
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Becton Dickenson (NYSE:BDX) is up nearly 9.9% year to date. Of the 19 analysts covering its stock, 14 rate it Overweight or Buy, with a target price of $302.
When Barron’s piece was written a year ago, the medical supplies and life sciences tools and technology company traded for 14x earnings before interest, taxes, depreciation, and amortization (EBITDA). It now trades at 18x.
The Q3 2023 results show revenue increase by 6.3%, excluding currency, to $4.88 billion, with adjusted earnings per share increasing 15% to $2.96 a share. Revenues were up in the U.S. (57% of sales) and internationally (43%).
For all of 2023, it expects $19.3 billion in revenue, with adjusted EPS of $12.21 at the midpoint of its guidance.
Boston Scientific (BSX)
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Boston Scientific (NYSE:BSX) is up nearly 19% year to date (YTD). Of the 32 analysts covering its stock, 28 rate it Overweight or Buy, with a target price of $60.50.
In Barron’s roundtable, Gallo pointed to the company’s “above-market growth in all its key divisions. It is positioned to grow broadly for some years into the future”.
The medical device company’s shares rallied on Aug. 28 after it reported positive results from its clinical trial for its atrial fibrillation device.
“The Farapulse Pulsed Field Ablation (PFA) uses electric fields to remove heart tissue causing irregular heartbeats, rather than the more traditional thermal method,” Investopedia reported. “The study involved 607 patients with paroxysmal AF who had previously been unsuccessfully treated with at least one anti-arrhythmic drug.”
In Q2 2023, the company’s revenues rose 12.0% year over year (YOY) on an operational basis to $3.60 billion. The company’s guidance had called for 8% growth at its midpoint. Its adjusted EPS in the quarter was $0.53, four cents higher than its guidance.
For the year, it expects sales growth of 10.5% to 11.5%, with adjusted EPS between $1.96 and $2.00.
Edwards Lifesciences (EW)
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Edwards Lifesciences (NYSE:EW) reported its Q2 2023 results at the end of July. While they were better than expected, its shares fell on near-term growth concerns.
“It is exiting the pandemic with its leading TAVR (transaortic valve replacement) franchise well positioned for continued growth after the recent lull,” Barron’s reported on Gallo’s comments last September. “Over the next decade, two newer and currently smaller markets, mitral and bicuspid valve repair, will join TAVR as important growth engines.”
Despite the decline at the end of July, EW stock remains in positive territory YTD, up nearly 5%. Over the past five years, it’s up 62%, higher than the S&P 500. Of the 30 analysts covering its stock, 16 rate it Overweight or Buy, with a target price of $99, considerably higher than currently trading.
In 2023, Edward Lifesciences expects revenue of $6.0 billion at the midpoint of its guidance, up from its previous estimate of $5.8 billion. It expects to earn $2.55 a share this year, up a penny from its previous guidance. Also, it is hopeful that TAVR will generate $3.93 billion in 2023, accounting for more than 65% of its total revenue. This would deliver growth of 11.5% YOY, excluding currency.
As recently as December 2021, it traded near $130. It’s got the growth to get back there in 2024.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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