The 3 Best Healthcare Stocks to Buy Now
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With the exception of energy and utilities, all sectors of the S&P500 are in the red for the year. Among the losing sectors, healthcare stocks held up relatively well, outperformed only by consumer staples.
This relative strength can be attributed mainly to two factors. First, with the country putting the coronavirus pandemic in its rearview mirror, people stopped postponing routine and elective health care. Second, the Democratic-controlled Congress recently passed new health care provisions that are less onerous than some feared.
While the Cut Inflation Act was touted by CNBC as giving Medicare “historic new powers over drug pricing,” it only gives the federal government the ability to negotiate the prices of the 10 drugs that it pays the most and not until 2026. These are drugs that have been on the market for a long time and have no generic or other competitor. This means that the new law will not affect the vast majority of drug manufacturers. The bill also does not include other major provisions that will negatively affect the health sector.
With investors less concerned about increased regulation in the sector, now is the time to buy the best healthcare stocks.
|CCRN||Cross Country Health Care||$26.66|
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Illuminated (NASDAQ:ILMN) operates in the field of genomic analysis, which involves selling tools that allow scientists to analyze DNA. The company is doing quite well considering the difficult macroeconomic environment.
For the second quarter, earnings per share came in at 57 cents, well above the consensus estimate of 36 cents. However, revenue missed estimates by $60 million, rising 3.2% year-over-year to $1.16 billion. Citing macroeconomic concerns and unfavorable exchange rates, management lowered its full-year revenue forecast to a 4% to 5% increase from 14% to 16% growth previously. And diluted earnings per share are now expected to be in the range of $2.75-$2.90 for 2022.
Despite missed earnings and downside forecasts, SeekingAlpha noted that Citigroup added ILMN stock to “its 90-day positive catalyst watch,” citing “pricing power and favorable bioprocessing trends outside of COVID “.
Speaking of potential positive catalysts, Illumina is reportedly in talks to divest its subsidiary Grail, which has developed a blood test that the firm says “can detect more than 50 types of cancer.” Illumina acquired Grail last year for $7.1 billion before winning approval from European Union antitrust regulators. In all likelihood, Illumina will either sell Grail, significantly bolstering its cash position, or divest part of the business to Illumina shareholders. Either way, ILMN stock should rally significantly.
Regeneron Pharmaceuticals (REGN)
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Next on my list of healthcare stocks to buy is Regeneron Pharmaceuticals (NASDAQ:REGN). Shares of the biotech company are up 15% year-to-date and hit a new all-time high this week after the release of positive clinical data that is expected to significantly boost sales of its most lucrative drug, Eylea.
Given by injections, Eylea was already approved in the United States for the treatment of vision problems caused by diabetic macular edema and wet age-related macular degeneration. The new studies have shown the effectiveness of a higher dose administered less frequently (12 or 16 weeks compared to eight weeks currently). Less frequent injections should make the drug more appealing to patients. It will also help Illumina avoid competition from a similar drug made by rock (OTC:RHBY) which only requires some patients to receive doses every 12 or 16 weeks.
The company’s revenue is expected to decline this year, but analysts expect 6% growth in 2023. And with a consensus EPS estimate of $38.34 for next year, REGN stock is trading with a price ratio /attractive earnings of 18.9.
Inter-Country Healthcare (CCRN)
Finishing my list of the best healthcare stocks to buy is Cross Country Health Care (NASDAQ: CCRN), which provides talent management and other consulting services to US healthcare clients. The company has benefited from a tight labor market over the past year and a half.
Revenue doubled in 2021 to $1.68 billion, while net income increased 1,115% from 2020 to $132 million. And adjusted EPS came in at $3.06 versus $0.46 a year earlier.
On average, analysts expect revenue to rise nearly 60% this year to $2.67 billion and EPS to jump 53% to $4.69. That means CCRN stock is trading at just 5.7 this year’s earnings estimate.
Continued Covid-19-related hospitalizations and an aging population bode well for Cross Country Healthcare in the short to medium term and long term, respectively.
Investor’s Business Daily gives CCRN stock “a perfect EPS rating of 99, a composite rating of 97 and a relative strength rating of 95.”
As of the date of publication, Larry Ramer held a long-serving position with the ILMN. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.
Larry Ramer has researched and written about US stocks for 15 years. He was employed by The Fly and Israel’s largest business newspaper, Globes. Larry started writing columns for InvestorPlace in 2015. Some of his highly successful contrarian picks include GE, solar stocks and Snap. You can reach him on StockTwits at @larryramer.
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