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5 Healthcare Stocks to Beat a Recession

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The global economic downturn and the looming recession have created panic among investors. Here are five stocks from the possibly recession-resistant healthcare sector that could boost investors’ sentiment.

Here are five healthcare stocks with a Strong Buy rating and a Smart Score of eight or above on TipRanks: UnitedHealth Group, Inc. (NYSE: UNH), Encompass Health Corp. (NYSE: EHC), Eli Lilly and Co. (NYSE: LLY), McKesson Corp. (NYSE: MCK) and Boston Scientific Corp. (NYSE: BSX).

Healthcare is one of the industries that benefitted the most from the COVID-19 pandemic. While the rest of the sectors faced tremendous difficulty staying afloat, healthcare companies made huge profits. The fear of catching the virus made people across the world extra cautious about their health and they stocked up on medical supplies and increasingly used healthcare services.

As we complete two years since the emergence of coronavirus, the pandemic is far from over with several nations yet to complete the double vaccination of all their citizens. This continues to keep the healthcare sector in the limelight.

Additionally, the digital boom, which the pandemic brought with it, the advances in medical science, and increased awareness among people about the benefits of good health have also helped boost the healthcare industry.

UnitedHealth Group (UNH)

Minnesota-based UnitedHealth provides healthcare and insurance products and services. Its Optum business offers technology and data-enabled healthcare services. Last week, the company announced excellent results for the second quarter of 2022.

Earnings grew 18.5% year-over-year to $5.57 per share, beating the Street’s estimate of $5.21 per share. Revenues increased 13% to $80.3 billion, driven by double-digit growth at both Optum and UnitedHealth segments. According to FactSet, the consensus revenue estimate stood at $79.7 billion.

On the basis of its first and second-quarter results, UnitedHealth has raised its guidance for full-year 2022. It now expects adjusted EPS to come in at $21.90 versus the earlier projection of $21.40. Analysts expect full-year EPS of $21.69.

Following the announcement of the results, Jefferies (NYSE: JEF) analyst David Windley maintained a Hold rating on the stock and raised the price target to $513 from $487 (1.2% downside potential).

Windley said, “Investors have taken refuge in healthcare services because managed care organizations don’t face as many inflationary pressures given that contracts are frequently renegotiated. They’re also insulated from foreign exchange headwinds, which will impact many large-cap companies this earnings season.”

On TipRanks, the stock has a Strong Buy consensus rating based on 14 Buys and three Holds. UNH’s average price target of $588 reflects upside potential of 13.2% from current levels. Further, the stock has a Smart Score of eight out of 10 on TipRanks, which implies that UNH is likely to outperform the market.

Encompass Health (EHC)

Based out of Alabama, Encompass Health provides home-based as well as facility-based post-acute healthcare services in 36 U.S. states and Puerto Rico. It has a network of hospice agencies, home health agencies, and inpatient rehabilitation hospitals.

The company is scheduled to release its second-quarter results on August 1. The Street anticipates earnings to amount to $0.78 per share, down from the year-ago figure of $0.93 per share.

In the first quarter, EPS declined 7.7% year-over-year to $0.97 per share, coming in above analyst expectations of $0.73 per share. Meanwhile, revenues jumped 8.4% to $1.33 billion, mainly due to volume increase in both inpatient rehabilitation, and home health and hospice segments. Adjusted EBITDA fell 2.3% to $245 million.

For the full year, Encompass expects revenues to range from $5.38 billion to $5.5 billion and adjusted EPS to lie between $3.83 and $4.19. Adjusted EBITDA is projected to be in the range of $1.015 billion to $1.065 billion.

After the first-quarter results were announced, Raymond James (NYSE: RJF) analyst John Ransom reiterated a Buy rating on the stock but lowered the price target to $70 from $85 (43.3% upside potential).

In a research note to investors, Ransom said, “Management’s updated 2022 EBITDA guidance came in around $17 million lower than our estimates on an apples-to-apples basis.”

The stock has a Strong Buy consensus rating on TipRanks, based on 11 unanimous Buys. EHC’s average price forecast of $76.55 reflects upside potential of 56.7%. Moreover, the stock scores a ‘Perfect 10’ on TipRanks’ Smart Score rating system. This implies that it has strong potential to outperform market expectations.

Eli Lilly (LLY)

Indiana-based Eli Lilly specializes in the discovery, development, production, and distribution of pharmaceutical products. It has offices in 18 nations, and its products are available in nearly 125 countries across the world. The pharmaceutical giant is scheduled to announce its second-quarter results on August 4.

The consensus EPS estimate stands at $1.71, compared to earnings of $1.87 per share in the second quarter of last year. In the first quarter, the company’s EPS rose 63% year-over-year to $2.62, beating the Street’s estimate of $2.29 per share.

Revenues increased 15% to $7.81 billion, driven by 20% volume growth. For full-year 2022, Eli Lilly expects adjusted EPS to range from $8.15 to $8.30.

On TipRanks, the stock has a Strong Buy consensus rating based on 10 Buys and three Holds. LLY’s average price target of $335 reflects an upside potential of 4.1% from current levels. On TipRanks, the company has a Smart Score of eight, which suggests that its stock is likely to outperform the market.

McKesson (MCK)

Headquartered in Texas, McKesson offers medical supplies, pharmaceutical products, care management tools, and healthcare IT systems and services. The company has a workforce of 78,000 people. It is scheduled to release its fiscal first-quarter results on August 3.

The Street anticipates EPS of $5.28, lower than the year-ago figure of $5.56. In the fiscal fourth quarter ended March 31, McKesson’s earnings grew 15.5% year-over-year to $5.83 per share, missing analyst expectations of $6.03 per share.

Total revenues increased 12% to $66.1 billion. For the Fiscal Year 2023, the company provided an adjusted EPS guidance range of $22.90 to $23.60.

As per TipRanks, the stock has a Strong Buy consensus rating, which is based on nine Buys and two Holds. MCK’s average price forecast of $373 reflects upside potential of 14.4%. Moreover, the stock scores a ‘Perfect 10’ on TipRanks’ Smart Score rating system, implying that it could easily outperform the market.

Boston Scientific (BSX)

Delaware-based biotechnology firm Boston Scientific produces and sells medical devices and products used in various interventional medical specialties. It also manufactures devices for diagnosing and treating pulmonary and gastrointestinal issues, technologies for treating cardiovascular disorders, and implantable devices.

The company is slated to release its second-quarter results on July 27, and the consensus EPS estimate stands at $0.43, compared to $0.40 last year. Boston Scientific expects net sales growth of 3%-6% year-over-year, and adjusted EPS to lie between $0.41 and $0.43 in the second quarter.

In the first quarter, the medical devices company’s earnings came in line with the Street’s estimate of $0.39 per share, up 5.4% year-over-year. Sales grew 10% to over $3 billion.

For full-year 2022, it anticipates adjusted EPS to range from $1.74 to $1.79 and net sales to increase 7%-9%.

On TipRanks, the stock commands a Strong Buy consensus rating based on 11 Buys and two Holds. BSX’s average price target of $47.46 reflects upside potential of 27.7%. The company has a Smart Score of nine out of 10, which suggests the stock is likely to outperform the market.

Are Healthcare Stocks Recession Proof?

At a time when inflation levels have hit record highs and the world is preparing for a recession, healthcare could be a recession-resistant sector. The aforementioned healthcare stocks could be a good investment option in the current economic scenario.

You can find more such stocks by using TipRanks’ Stock Screener tool, which offers a number of filters suck as market cap, analyst consensus rating, and dividend yield.

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