Wolfe Research has indicated that it may be an opportune time to reconsider investments in health-care stocks. This sector recently underperformed, declining over 4% from September to October, 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 rebounding towards previous highs, which could benefit stocks across the sector.
Additionally, many health-care stocks offer the advantage of dividend payouts. CNBC Pro identified stocks within the S&P 500 health-care sector that present a dividend yield of 1.5% or more, exceeding the overall S&P 500 yield. FactSet data indicates that over 51% of analysts covering each of these stocks rate them as buys.
Abbott Laboratories is one such company, offering a 1.9% dividend yield. The company, which produces pharmaceutical, diagnostic, nutritional products, and medical devices, received a buy rating from about 55% of analysts with an 11% upside to the average price target, according to FactSet. In the third quarter, Abbott reported higher than expected earnings and revenues, and it adjusted its full-year earnings-per-share guidance upwards. CEO Robert Ford mentioned that the company is well-positioned heading into next year, having gained 8% year to date despite recent legal challenges over its infant formula.
Becton, Dickinson and Company provides a 1.6% dividend yield, with 60% of analysts rating it a buy and nearly 16% potential upside to the average price target. Its shares have seen little change year to date.
Cigna, another health-care company yielding 1.6%, has close to a 13% upside to the average analyst price target, with 71% of analysts rating it a buy. It faces challenges as its Express Scripts division is under scrutiny by the Federal Trade Commission for allegations concerning insulin pricing. Cigna, along with CVS Health and UnitedHealth Group, has filed a motion seeking the recusal of FTC Chair Lina Khan and two commissioners from the lawsuit, citing bias against the companies. Cigna reported better-than-expected earnings and revenue in the second quarter, and its third-quarter results are anticipated on October 31.
Merck & Co., which yields 2.8%, shows nearly 26% upside to analysts’ consensus price target, and receives a buy rating from 64% of analysts. The company, focusing on prescription medicines such as vaccines and biologic therapies, reported positive outcomes for its experimental RSV treatment in a trial and strong sales in its oncology and vaccine divisions. Merck’s second-quarter revenue and earnings surpassed expectations, even as its HPV vaccine Gardasil underperformed. Its third-quarter results are also expected on October 31, with shares remaining unchanged year to date.
