The healthcare sector benefited from increased caseload, higher occupancy, and several expansion plans in 2024. A significant increase in elective surgeries and non-urgent procedures led to the increase in caseloads. Advances in technology, an emphasis on consumer-centric healthcare models, and improved health equity have benefited companies in the healthcare sector. However, labor shortages and margin pressures, combined with regulatory uncertainty, continue to weigh on the outlook for businesses.
A key trend for 2024 is the continued adoption of digital health technologies that will revolutionize the way healthcare is delivered. From telemedicine to AI-driven tools and electronic health records (EHRs), the integration of digital platforms allows healthcare providers to improve the patient experience and increase operational efficiency. In particular, generative AI (gen AI) is gaining traction and is being used for administrative tasks such as claims processing and clinical applications such as personalized treatment planning.
Despite government efforts to curb inflation by lowering interest rates, the healthcare industry is struggling with rising medical costs. To address this, healthcare organizations are looking for ways to expand access through digital health solutions, increase cost transparency, and develop products that address a broader range of consumers. According to Deloitte's 2024 Healthcare Consumer Survey, both men and women are avoiding care due to cost and affordability concerns. Investing in virtual care is a timely move, as 64% of consumers find virtual visits convenient, according to Deloitte's 2024 U.S. Healthcare Consumer Survey.
Trends such as preventive care, faster recovery times, improved patient outcomes, and growth in robotic surgery bode well for companies like Veracyte and Globus Medical. Healthcare expansion projects are gaining momentum as organizations seek to strengthen capacity, improve patient care, and adapt to increasing inpatient and outpatient demands. The sector has also seen increased merger and acquisition activity as companies consolidate resources, achieve operational synergies, and position themselves for long-term growth.
Potential policy changes under the new administration could have a significant impact on the profitability of healthcare companies, creating uncertainty within the industry. Concerns about reduced government spending, reduced hospital funding and expiring insurance subsidies could put pressure on health care provider profit margins.
The Zacks Medical sector has declined 2.4% since the beginning of the year, in sharp contrast to the S&P 500's robust growth of 25.8%.
Zacks Medical Sector Year-to-date Stock Performance
Zacks Investment Research
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We identify five healthcare stocks with the perfect combination of growth and stability: Veracyte, Inc. VCYT, Globus Medical, Inc. GMED, Encompass Health Corporation EHC, Pediatrix Medical Group, Inc. MD, and The Ensign Group. , Inc. selected ENSG. Investors will be able to take advantage of it in 2025.
These companies currently boast a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Veracyte: California-based company benefits from strong growth potential from market-leading Decipher Prostate and Afirma tests, delivering impressive revenue growth and record quarterly sales in Q3 I did. The company's expanding gross and operating margins demonstrate its operational efficiency and strong market position. This Zacks #1 Rank company's strong cash position and ability to effectively manage costs suggest a solid foundation for investment and continued innovation in the diagnostic space.
The Zacks Consensus Estimate for Veracyte's current-year earnings is pegged at 38 cents per share, suggesting an increase of 137.3% from the year-ago period. In the past 60 days, estimates have been revised upward three times, but not in the opposite direction. VCYT has surpassed the Zacks Consensus Estimate for its earnings over the past four quarters, with an average surprise of 520.6%.
Average broker recommendation: 1.86
Last closing price: $39.53
Veracyte, Inc. Price and EPS Surprise
Veracyte, Inc. price-eps-surprise | Veracyte, Inc. quote
Globus Medical: The Pennsylvania-based company has benefited from the successful integration of NuVasive, strong sales of spinal products, and increased adoption of enabling technologies such as Excelsius GPS and E3D systems. The company's expanded product portfolio, collaboration and enhanced internal development processes position it well for continued innovation and market expansion. The Zacks Rank #2 company's increased guidance could further improve its outlook.
The Zacks Consensus Estimate for Globus Medical is projecting earnings of $2.97 per share for the current quarter, representing year-over-year growth of 28%. There have been seven upward revisions to estimates over the past 60 days, but no reverse revisions. GMED has exceeded the Zacks Consensus Estimate over the past four quarters, delivering an average surprise of 17.7%.
Broker average recommendation: 1.80
Last closing price: $81.78
Globus Medical, Inc. Stock Price and EPS Surprise
Globus Medical, Inc. price-eps-surprise | Globus Medical, Inc. quote
Encompass Health: Headquartered in Alabama, EHC has demonstrated strong performance over the past several quarters with strong hospital discharge growth, adjusted EBITDA growth, and strategic expansion through hospital openings and bed additions. Ta. The company's focus on operational efficiency is evident in its improved net income, comprehensive income, and adjusted free cash flow. Higher 2024 revenue, EBITDA and EPS guidance, as well as solid long-term growth targets, bode well for this Zacks Rank #2 company.
The Zacks Consensus Estimate for Encompass Health Inc.'s current-year earnings is pegged at $4.28 per share, representing year-over-year growth of 17.6%. Over the past 60 days, estimates have been revised upward nine times, but not in the opposite direction. EHC has surpassed the Zacks Consensus Estimate on its earnings over the past four quarters, delivering an average surprise of 13.6%.
Broker average recommendation: 1.08
Last closing price: $94.31
Including Health Corporation's Stock Price and EPS Surprise
Encompass Health Corporation Price-eps-surprise | Encompass Health Corporation Quote
Pediatrix Medical: Headquartered in Florida, Maryland, the company continues to show strong same-segment revenue growth, improved reimbursement-related factors and significant profit growth. Declines in practitioner salaries and benefits highlight ineffective cost management. The company's solid operating cash flow and strengthened cash position provide financial stability. Adjusted EBITDA growth and continued focus on restructuring strengthen the outlook for this Zacks Rank #2 company.
The Zacks Consensus Estimate for Pediatrix Medical's current-year earnings is pegged at $1.35 per share, suggesting year-over-year growth of 7.1%. Over the past 60 days, estimates have been revised upward six times, but not in the opposite direction. MD has exceeded the Zacks Consensus Estimate for earnings in three of the last four quarters, hitting the mark once, with an average surprise ratio of 9.9%.
Broker average recommendation: 2.25
Last closing price: $14.01
Pediatrix Medical Group, Inc. Stock Price and EPS Surprise
Pediatrix Medical Group, Inc. Price-eps-Surprise | Pediatrix Medical Group, Inc. Quote
Ensign: California-based ENSG continues to be supported by strong performance in its Skilled Services segment with improved occupancy and patient days. Ensign's consistent revenue growth (forecasted to be 14.1% in 2024), along with an increased adjusted EPS estimate, demonstrates its operational efficiency and resilience. Additionally, its focus on acquisitions and growing rental revenue suggests potential for further expansion and value creation, making this Zacks Rank #2 company an attractive prospect.
The Zacks Consensus Estimate for Ensign's current-year earnings is pegged at $5.49 per share, suggesting year-over-year growth of 15.1%. There have been four upward revisions to estimates over the past 60 days, but no reverse revisions. ENSG has surpassed the Zacks Consensus Estimate for its earnings over the past four quarters, with an average surprise of 1.3%.
Broker average recommendation: 1.50
Last closing price: $136.41
The Ensign Group, Inc. Stock Price and EPS Surprise
Ensign Group, Inc. Price-eps-Surprise | Ensign Group, Inc. Quote
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Pediatrix Medical Group, Inc. (MD): Free Stock Analysis Report
Globus Medical, Inc. (GMED): Free Stock Analysis Report
The Ensign Group, Inc. (ENSG): Free Stock Analysis Report
Veracyte, Inc. (VCYT): Free Stock Analysis Report
Encompass Health Corporation (EHC): Free Stock Analysis Report
