Healthcare continues to be a major industry and economic driver around the world. According to the American Medical Association, spending on healthcare in the U.S. totals more than $4 trillion each year, which works out to nearly $13,000 per person. And the amount being spent on health is forecast to continue rising in coming years as the American population ages. By 2028, the U.S. is expected to be spending more than $6 trillion a year on healthcare, representing an increase of 50% in only five years. This makes healthcare stocks a fairly safe bet for buy-and-hold investors. Long-term, few stocks are likely to outperform those in the healthcare sector. This includes stocks of pharmaceutical companies, health insurers, medical device manufacturers, and firms involved in the growing field of virtual medicine. As the medical sector grows dramatically, we offer up seven millionaire-maker healthcare stocks to buy before the window closes.
Danaher (DHR)
Danaher Corp. (NYSE:DHR), which makes highly technical and life-saving medical devices, just reported second-quarter earnings, and, as usual, the company beat Wall Street forecasts on both the top and bottom lines. The company reported earnings per share (EPS) of $2.05, which was better than the consensus expectation of analysts for earnings of $2 a share. Revenue for Q2 came in at $7.16 billion, which was also above Wall Street forecasts of $7.11 billion, according to Refinitiv data.
It was the fourth consecutive quarter in which Danaher beat Street forecasts for its earnings per share. Yet, in a cruel twist of fate, Danaher’s stock fell after the latest earnings print due to weaker-than-expected free cash flow. Danaher said that its Q2 free cash flow amounted to $1.59 billion, which was below consensus analyst forecasts of $1.73 billion. DHR stock is now down 7% over the last 12 months. Investors should see it as a buy-the-dip opportunity. In the last five years, the stock has risen nearly 150%.
Johnson & Johnson (JNJ)
Healthcare and pharmaceutical giant Johnson & Johnson (NYSE:JNJ) also just reported better-than-expected Q2 earnings and raised its full-year guidance as sales in its MedTech business unit strengthened. Johnson & Johnson reported EPS of $2.80 versus $2.62 that had been expected on Wall Street. In the quarter ended June 30, revenue amounted to $25.53 billion compared to $24.62 billion, which was expected among analysts tracking the company’s progress.
Johnson & Johnson said in its earnings print that it is benefitting from a rebound in non-urgent surgeries among older adults who had deferred many procedures during the pandemic. Consequently, the company raised its forward guidance, saying it now expects full-year revenue of $98.8 billion to $99.8 billion, which is about $1 billion higher than previous guidance. The company also raised its 2023 earnings outlook, saying it expects EPS of $10.70 to $10.80, up from a previous range of $10.60 to $10.70 a share.
JNJ stock has been flat over the last 12 months (up 0.02%), and it pays a quarterly dividend of $1.19 a share for a decent yield of 2.76%.
UnitedHealth Group (UNH)
Another company that just crushed its Q2 print is UnitedHealth Group (NYSE:UNH), the largest health insurer in the U.S. The company, which is bigger than the largest banks in America, reported an EPS of $6.14 versus the $5.99 that had been expected on the Street. Revenue for the quarter came in at $92.9 billion compared to consensus estimates of $91.01 billion. UnitedHealth attributed the earnings beat to its $8 billion acquisition of the healthcare technology company Change Healthcare, as well as a spike in the number of patients served.
The typically strong earnings underscore why UNH stock is a long-term winner for investors. Over the last five years, UNH stock has effectively doubled. The company’s share price has gained more than 600% during the past decade. Looking ahead, the company lifted the low end of its full-year earnings outlook to EPS of $24.70 to $25, up from a previous forecast of $24.50 to $25.00 per share. With its size and earning power, UNH is one of the best healthcare stocks to buy and hold.
McKesson (MCK)
McKesson Corp. (NYSE:MCK) is another huge U.S. healthcare company that has a track record of delivering strong returns to stockholders. The company delivers a third of all pharmaceuticals used in the U.S. and Canada and also provides health information technology, medical supplies, and care management tools. Today, McKesson has nearly 80,000 employees and annual revenues approaching $300 billion. The company also runs a retail chain of pharmacies within Canada.
MCK stock has had a bumpy ride over the last year as the company was caught up in the opioid crisis and related financial settlements. This year, McKesson’s share price is up 10%, trailing the S&P 500 index’s gain of nearly 20%. However, through five years, MCK stock is up 232%, proving that it is a healthcare stock to buy. Currently trading at 16 times future earnings and with a quarterly dividend payout of 62 cents a share, McKesson’s stock has a lot to recommend it.
Eli Lilly (LLY)
If there’s one healthcare stock to make your millionaire dreams come true, it is pharmaceutical company Eli Lilly (NYSE:LLY). The company’s share price has been running circles around other pharma stocks this year on growing excitement over Mounjaro, or Tirzepatide as it is also known, a medication that treats Type 2 Diabetes but has also been found to cause dramatic weight loss in people, opening the door for it to be used to treat obesity.
The company anticipates getting approval from the U.S. Food and Drug Administration (FDA) to sell Mounjaro as a weight loss treatment by year’s end. Some analysts are confidently forecasting that Mounjaro will be the biggest blockbuster drug of all time. Several analysts have raised their price targets on LLY stock recently, including Morgan Stanley, which maintained a “buy” rating and lifted its target on the stock to $560, implying a 23% upside from current levels. LLY stock has gained 38% in the last 12 months.
Intuitive Surgical (ISRG)
Another buy-the-dip candidate can be found in Intuitive Surgical (NASDAQ:ISRG), the company that makes robotic instruments for minimally invasive surgical procedures. ISRG stock has dropped 8% since the company recently posted Q2 earnings. The decline is disappointing given that the company beat Wall Street forecasts across the board, reporting EPS of $1.42 and revenue of $1.76 billion, which beat expectations of $1.33 in earnings on $1.74 billion in revenue, according to Refinitiv data.
ISRG stock fell after the Q2 print because the company’s systems unit revenue came in lighter than forecast at $392.7 million, missing consensus estimates for $415.9 million. However, the dip presents a gift to investors who can now take a position in ISRG stock at a favorable price. Despite the recent drop, Intuitive Surgical’s stock is still up 25% this year, has increased 53% over the last 12 months, and has gained more than 90% through five years. Make no mistake. This is a millionaire-maker healthcare stock.
Teladoc Health (TDOC)
Investors with an appetite for risk should consider Teladoc Health (NYSE:TDOC). The company behind telemedicine and virtual doctor appointments was a darling during the pandemic as healthcare consultations were forced online. Coming out of the global health emergency though, TDOC stock has cratered as patient visits plunged and investors soured on the company and its business model. Teladoc shares are now trading 93% below the all-time high they reached in Feb. 2021, just before the pandemic trade reversed.
Another issue facing TDOC stock is poor earnings and a lack of profits at the company. However, in this area, Teladoc Health has made major strides. The company just reported Q2 earnings that showed its revenue rose 10% year-over-year to $652.4 million, which was in line with consensus estimates. More importantly, the company’s net loss narrowed dramatically to $65.2 million from $3.1 billion in the same quarter of 2022. TDOC stock is down 43% in the last 12 months. But the share price jumped 7% higher on the Q2 print. Time to buy the dip.
On the date of publication, Joel Baglole held long positions in DHR and LLY. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
