So far in 2024, healthcare stocks have run into periodic earnings challenges compared to historical first quarters. For example, quarterly earnings for healthcare stocks across the board were down 25% compared to first-quarter 2023 earnings. Even with this setback, the healthcare sector maintained positive returns year-to-date and is still the second largest component of the S&P 500’s earnings in 2024, with only the technology sector ahead of it.
Moreover, according to U.S. Bank, the healthcare sector modestly outpaced the broader market from 2014 to 2022. Since then, technology stocks have soared while healthcare stocks fell back gently, underperforming the S&P 500 as a result.
Ultimately, a small subsection of healthcare stocks is still a critical component of many growth portfolios due to their central role in the broader industry. This has allowed them to outpace the overall market average.
McKesson (MCK)
America’s largest healthcare company and its ninth-largest by revenue, McKesson (NYSE:MCK), has made a fortune from pharmaceutical distribution. While that may not be as exciting as the companies rushing to develop the next big drug, it does ensure that MCK is always relevant to the broader healthcare industry.
For example, the company delivers a third of all pharmaceuticals used in North America and generated a stunning $309 billion in revenue for its fiscal year 2024. It achieved this feat through its extensive network of healthcare technologies, such as radio frequency identification tags, serialized barcodes, and pharmacy robotics.
This focus on technology helped the company become a key vaccine distributor during the COVID-19 pandemic, becoming the U.S. government’s centralized distributor for hundreds of millions of COVID-19 vaccine doses. Since then, MCK has continued to be one of the best-performing healthcare stocks, with no end to its success in sight as America’s aging and chronically ill populations rely on it for its services.
Universal Health Services (UHS)
Unlike developers or distributors in the healthcare industry, Universal Health Services (NYSE:UHS) has carved out its market share in the hospital management sector. Over the last month, UHS stock has soared on the exciting outcome of its second-quarter earnings report for the year. For example, the company raised revenue by 10% year-over-year, bringing it to $3.91 billion for the quarter.
Further, the company strategically increased net income to $289 million, representing a stunning 68.79% increase year-over-year. As a result, the company’s earnings per share rose by 76%, reaching $4.26. This outpaced analyst predictions by nearly 30% and ushered in the current bull run.
Beyond the financials, UHS has demonstrated its hospital management business model to be exceptionally cost-effective for its investors, which makes it a standout among healthcare stocks. Ultimately, as more Americans need hospital care due to the current obesity epidemic, UHS’ revenue and profits will continue to rise.
Regeneron Pharmaceuticals (REGN)
Rising to relative fame during the COVID-19 pandemic, Regeneron’s (NYSE:REGN) monoclonal antibodies became the center of significant speculation regarding the biotechnology’s potential applications. While its scientific advancements are impressive, investors should also consider the factor that the company has maintained the same CEO, Leonard Schleifer, since its founding in 1988.
A science-driven company like Regeneron, still driven and guided by the original physician-researcher who founded it, speaks volumes to the quality and relevance of the studies it conducts. Moreover, the company’s recently reported second-quarter earnings inspire continued investor confidence.
With revenue, net income, and profit margin increases all in the green, the company’s generous beats of EPS and revenue guidance put it on a solid trajectory for the rest of 2024. Looking past the short term, the company’s continued prioritization of strong management and scientific inquiry makes it one of the better long-term healthcare stocks to consider.
On the date of publication, Viktor Zarev 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.