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4 Healthcare Stocks to Gain From Stellar Q3 Earnings

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The healthcare sector has put up a decent performance since the beginning of fourth-quarter 2019, thanks to a string of positive factors. Let us thus take a look at what brought about this change and how one may benefit from this upward movement of healthcare stocks.

To be specific, let’s consider stocks whose earnings had surpassed the Zacks Consensus Estimate in Q3 and have given a positive guidance.

Healthcare Rushing Ahead

The Health Care Select Sector SPDR (XLV) has increased 9.7% since Oct 1, ahead of the rest of the S&P 500 sectors. Although the sector’s year-to-date growth is 14.9%, which is lower than all other constituting sectors of the S&P 500, its participants haven’t disappointed investors.

In fact, some of the major reasons behind the strong growth since the beginning of the fourth quarter are approval and launch of new drugs, fast-paced research and innovation. Continued implementation of cutting-edge technology, a growing market for biosimilars, rise in insurance coverage and new job vacancies have also pushed the sector ahead.

What’s more, healthcare spending by vital fund sources such as private health insurance, Medicare and Medicaid are also drivers of the sector.

In addition, per the latest report by the Bureau of Labor Statistics, healthcare was one of the highest job-gaining sectors in October with 15,000 new vacancies. In fact, the sector has added 402,000 jobs over the last one year.

But these factors aren’t the only reasons why healthcare stocks should be looked at from an investment perspective. Healthcare is one of those few sectors that aren’t much affected by market gyrations, thus promising growth over a longer period.

Our Choices

We have, therefore, selected four healthcare stocks whose earnings and revenues for third-quarter 2019 beat the respective Zacks Consensus Estimate. Investors may consider adding these to their portfolio. All of these stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Amedisys, Inc. (AMED - Free Report) is a provider of healthcare services. The company reported adjusted earnings of $1.15 per share in third-quarter 2019, up 21.1% from the Q3 2018 figure. Net service revenues of Amedisys totaled$494.6 million, up 18.5% year over year. The top line slightly matched the Zacks Consensus Estimate. (Read more)

The company finished Q3 2019 on a promising note. In fact, Amedisys witnessed strong year-over-year growth in Medicare and non-Medicare revenues and performed exceptionally in its recently launched personal care segment. The Zacks Consensus Estimate for Amedisys’ current-year earnings has risen 5.5% over the past 60 days. Amedisys carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita Inc. (DVA - Free Report) is a provider of kidney dialysis services. The company reported third-quarter 2019 adjusted earnings per share of $1.53, surpassing the Zacks Consensus Estimate of $1.23.DaVita’s total Q3 revenues of $2.90 billion also beat the Zacks Consensus Estimate of $2.85 billion. (Read more)

DaVita raised its guidance for 2019. The company now expects adjusted operating income of $1.74-$1.77 billion against the previous guidance of $1.64-$1.70 billion. The Zacks Consensus Estimate for DaVita’s current-year earnings has risen 10.6% over the past 60 days. DaVita carries a Zacks Rank #1.

Tenet Healthcare Corporation (THC - Free Report) is a diversified healthcare services company. It reported third-quarter 2019 adjusted net income of 58 cents per share, which beat the Zacks Consensus Estimate by 107.1%. Net operating revenues came in at $4.5 billion, up 1.8% year over year. In addition, the top line beat the Zacks Consensus Estimate by 2.4%. (Read more)

The company revised its guidance for 2019 after releasing third-quarter results. Revenues are now expected between $18.350 billion and $18.550 billion compared with the earlier view of $18-$18.4 billion.The Zacks Consensus Estimate for Tenet Healthcare’s current-year earnings has risen 10.8% over the past 60 days. Tenet Healthcare carries a Zacks Rank #2.

Hanger, Inc. (HNGR - Free Report) provides orthotic and prostheticservices and therapeutic solutions to patients and businesses. The company reported third-quarter 2019 earnings of 25 cents per share, surpassing the Zacks Consensus Estimate of 23 cents. Hanger posted revenues of $279.64 million for the said quarter, beating the Zacks Consensus Estimate by 2.01%. (Read more)

In fact, the company plans to invest about $22 million-$27 million of additional cash in 2020 and about $6-$8 million in 2021 in supply chain reengineering and systems initiatives. These investments are expected to offer a decent margin improvement for Hanger. The Zacks Consensus Estimate for Hanger’s current-year earnings has risen 3.4% over the past 60 days. Hanger carries a Zacks Rank #2.

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Tenet Healthcare Corporation (THC) - free report >>

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Amedisys, Inc. (AMED) - free report >>

Hanger Inc. (HNGR) - free report >>