The healthcare sector has grown steadily as America ages and the demand for healthcare goes up every year. “Hold”-rated Johnson & Johnson (JNJ) kicked the sector off on Tuesday with a pretty strong report, beating expectations on 13% revenue gains as a result of new drug sales. But the stock sold off — analysts are just not that excited about second-half prospects for JNJ.
I expect that theme to play out over the coming earnings season for most of the big healthcare stocks – there aren’t a lot of exciting developments, and most are rated “hold” or “sell” right now. The real excitement — and profits — this earnings season will come from those healthcare stocks whose breakthrough products are improving and extending lives … and seeing huge revenue and profit gains as a result.
Anika Therapeutics (ANIK) uses naturally occurring polymers to make products that promote wound healing and tissue protection and repair. Anika recently had a drug approved for knee pain and joint mobility that is driving the growth for this company. Monovisc is an injectable drug that addresses a huge market. Knee osteoarthritis affects an enormous percentage of folks over the age of 50 in the U.S.
Analysts are expecting big things when Anika reports earnings on July 28. Earnings are expected to rise by more than 40% to $0.57 a share on 35% revenue growth. As impressive as that is, consider that Wall Street routinely underestimates ANIK; Anika has posted four consecutive earning surprises, including a triple-digit beat in the first quarter of 2014. Stock-rating tool Portfolio Grader upgraded the stock to an “A” back in November and it remains a “strong buy” today.
Gilead Sciences (GILD) makes a range of drugs used to treat life-threatening conditions. Gilead’s drugs are used to fight conditions like HIV, liver disease, pulmonary arterial hypertension, influenza, angina and cystic fibrosis. Earnings are expected to more than triple from last year’s $0.50 a share to $1.72. Wall Street sees revenue more than doubling, with a 102% year-over-year increase in sales. Estimates have surged by almost 70% in the past three months and analysts have continued to revise expectations higher in the past few weeks. Gilead was raised to an “A” back in November and is still a “strong buy” going into the July 23 earnings release.
Illumina (ILMN) is a life sciences company that makes systems used to map and sequence genomes and decode DNA. The company sells its products to universities, government research centers, pharmaceutical companies and clinical research organizations. Analysts are looking for a solid quarter with earnings gains of 18% on 23% revenue growth. Analysts may be underestimating the quarter, though, as Illumina has posted four consecutive positive surprises and estimates have been rising over the past 90 days. The stock has been rated “A” since December and is still a “strong buy” as we get closer to the July 23 earnings release.
Healthcare is one of the fastest-growing segments of our economy, and these healthcare stocks are leading the way. They make the types of products that extend and improve life … and that drive powerful growth. Their superior fundamentals should continue to shine this earnings season and produce strong gains for investors.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.