Inelastic demand, rising investments, and consistent breakthroughs make healthcare stocks attractive to investors amid these uncertain market conditions. Moreover, the growing demand for medical products and services from an aging population should drive revenue growth for companies in this space.
Also, rising chronic diseases have been increasing the demand for advanced medical products and services. According to the Centers for Medicare and Medicaid Services, U.S. national healthcare expenditure is estimated to reach $6.2 trillion by 2028.
Since the market is expected to remain highly volatile in the near term, medical stocks are considered attractive investments due to their ability to survive market fluctuations, given the inelastic demand.
Abbott Laboratories (ABT) and Utah Medical Products, Inc. (UTMD) are well-positioned to dodge market volatility and deliver stable returns. So, it could be wise to invest in these stocks now.
Abbott Laboratories (ABT)
Along with its subsidiaries, ABT discovers, develops, manufactures, and sells health care products worldwide. The company’s four operational segments are Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices.
Recently, ABT announced that the U.S. Food and Drug Administration (FDA) permitted Breakthrough Device Designation to investigate the use of its deep brain stimulation (DBS) system in treatment-resistant depression (TRD), a form of major depressive disorder (MDD). Breakthrough Device Designation fastens the review of innovative technologies that can enhance people's lives with life-threatening or irreversibly debilitating diseases or conditions.
Last month, ABT announced late-breaking clinical data that shows the FreeStyle Libre 3 system has an overall mean absolute relative difference (MARD) of 7.9%,1 making it the first and only 14-day continuous glucose monitoring (CGM) system to achieve a sub-8% overall MARD.
In April, ABT announced the launch of an upgraded version of its NeuroSphere myPath digital health app with improved functionality that will assist doctors more closely track their patients as they trial Abbott neurostimulation devices to address their chronic pain. This upgrade is a part of ABT's commitment to connected care technology. It has the motive to put people in control of their health and enable better communication with their doctors.
During the first quarter ending March 31, 2022, ABT's net sales increased 13.8% year-over-year to $11.90 million. Its operating earnings grew 38.1% from its year-ago value to $2.91 billion, while the net earnings improved 36.5% from its prior-year quarter to $2.45 billion. The company's EPS rose 37% year-over-year to $1.37.
The consensus EPS estimate of $4.91 for the year ending December 2023 represents a 0.8% improvement year-over-year. Analysts expect ABT’s revenue to increase 1.5% year-over-year to $10.38 billion for the second quarter ending June 2022. In addition, the company has an impressive earnings history as it surpassed the consensus EPS estimate in all of the trailing four quarters. The stock has gained 3.8% over the past month.
ABT's POWR Ratings reflect this promising outlook. The company's overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an A grade for Growth and a B for Stability and Quality. Within the D-rated Medical - Devices & Equipment industry, it is ranked #2 of 149 stocks.
Click here to see additional POWR Ratings for Sentiment, Value, and Momentum for ABT.
Utah Medical Products, Inc. (UTMD)
Headquartered in Midvale, Utah, UTMD develops, manufactures, and distributes medical devices for the healthcare industry. The company offers fetal monitoring accessories, vacuum-assisted delivery systems, and other labor and delivery tools; DISPOSA-HOOD infant respiratory hoods; and DELTRAN PLUS blood pressure monitoring systems.
During the first quarter ended March 31, 2022, UTMD's net sales increased 12.4% year-over-year to $12.32 million. Its operating income increased 16.3% year-over-year to $4.52 million, while its net income amounted to $3.53 million, up 16.9% from its prior-year quarter. The company’s EPS rose 16.6% year-over-year to $0.96.
UTMD’s revenue has grown at a CAGR of 6.4% over the past three years. Also, its EBITDA has grown at a CAGR of 7.7% over the same period. UTMD’s trailing-12-month EV/EBITDA of 8.8x is 45.1% lower than the industry average of 16.04x.
The stock has declined 1% over the past month and 1.8% over the past year.
UTMD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The stock also has an A grade for Stability and Quality and a B grade for Sentiment. In the same industry, it is ranked #3.
In total, we rate UTMD on eight different levels. Beyond what we've stated above, we have also given UTMD grades for Growth, Value, and Momentum. Get all the UTMD ratings here.
ABT shares rose $0.13 (+0.12%) in after-hours trading Monday. Year-to-date, ABT has declined -23.05%, versus a -18.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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