According to Wolfe Research, health-care stocks are poised for a recovery. Over the past month, the sector experienced a decline of over 4% from September to October, making it one of the worst-performing sectors, as noted by technical analyst Rob Ginsberg in a report released on Tuesday. Ginsberg highlighted that the Health Care Select Sector SPDR Fund (XLV) has moved back through the 50-day moving average during a relief rally. He suggested that the sector might be in the early stages of regaining momentum towards its previous highs, which could benefit stocks across the sector.
The rally in health-care stocks is bolstered by the additional advantage of dividend payouts. CNBC Pro conducted an analysis of the S&P 500 health-care sector and identified stocks with a dividend yield of 1.5% or more, higher than the S&P 500 yield. According to FactSet data, at least 51% of Wall Street analysts rate each of these stocks as a “buy.”
Abbott Laboratories offers a 1.9% dividend yield. The company is involved in the manufacture and sale of pharmaceuticals, diagnostics, nutritional products, and medical devices. Approximately 55% of analysts rate the stock as a “buy,” and it has an 11% upside to the average price target, according to FactSet. Abbott reported better-than-expected earnings and revenue for the third quarter and revised its full-year earnings-per-share guidance upwards. CEO Robert Ford stated that the company is well-positioned for strong performance this year and heading into next year. Abbott’s stock has increased by 8% year to date and has risen approximately 12% since July 26, following a court ruling that required it to pay $95 million in damages related to its premature infant formula.
Becton, Dickinson and Company, a global medical technology firm, provides a 1.6% dividend yield. According to FactSet, 60% of analysts rate the stock as a “buy,” with a potential upside of nearly 16% to the average price target. Becton’s shares have shown little change year to date.
Health insurer Cigna offers a 1.6% dividend yield and has a potential upside of nearly 13% to the average analyst price target. Almost 71% of analysts rate the stock as a “buy,” per FactSet. Cigna’s Express Scripts division is among the pharmacy benefit managers accused by the Federal Trade Commission of inflating insulin prices for profit. Cigna, CVS Health, and UnitedHealth Group have filed a motion requesting FTC Chair Lina Khan and two other commissioners to recuse themselves from the lawsuit, citing alleged bias against the companies. Cigna exceeded earnings and revenue expectations in its second-quarter report in August, and its third-quarter results are anticipated on Oct. 31. The company’s stock has risen by 14% this year.
Merck & Co. provides a 2.8% dividend yield, with a potential upside of nearly 26% to the consensus price target set by analysts. About 64% of analysts rate it a “buy.” The company, which focuses on prescription medicines, including vaccines and biologic therapies, reported positive results from a trial of its experimental treatment for the respiratory syncytial virus in infants. In July, Merck reported second-quarter revenue and adjusted earnings that surpassed analyst estimates, supported by strong sales of its cancer drug Keytruda, other oncology treatments, vaccines portfolio, and its newly launched cardiovascular drug, Winrevair. However, its HPV vaccine Gardasil recorded weaker-than-expected sales. Merck is scheduled to release its third-quarter results on Oct. 31, and its shares remain unchanged year to date.
