The United States is not alone as our population ages. We join Japan and several other developed nations with a larger percentage of the population growing older. Better diet, exercise and health care are driving the life expectancy for men and women higher. In a new report from Credit Suisse, the health care distribution and technology analysts highlight the top names that could benefit from an aging population that increases their use of not only health care services, but pharmacies clinical labs and other patient needs.
We screened the stocks in the Credit Suisse report looking for larger cap names that were rated Outperform
AmerisourceBergen Corp. (NYSE: ABC) is the world’s largest pharmaceutical distributor, and it trades at a sensible 17 times forward earnings per share (EPS) estimates. Last year the company completed the divestiture of its Canadian distribution business to Kohl & Frisch, the country’s only Canadian-owned national full-line pharmaceutical distributor. The company’s board of directors recently authorized a special $650 million share repurchase program intended to supplement the company’s previously announced warrant hedging strategy. Investors are paid a 1.3% dividend. The Credit Suisse price target for the stock is $76. The Thomson/First Call Wall Street consensus is right in line at $76.03. The stock closed Thursday at $73.28 a share.
Cardinal Health Inc. (NYSE: CAH) is a top name in the health care sector. The drug wholesaler’s board authorized an additional $1 billion in stock repurchases in the first quarter of this year. The new authorization is in addition to the company’s existing stock repurchase plan, which has $350 million remaining. The company is projected to grow EPS by 10.4% to $4.07 in 2015. For 2016, Cardinal is projected to increase EPS by 11.3% to $4.53. Investors receive a 2% dividend. The Credit Suisse price target is $76. The consensus price objective is $77.06. Cardinal closed Thursday at $71.11.
Catamaran Corp. (NASDAQ: CTRX) provides pharmacy benefit management (PBM) services and health care information technology (HCIT) solutions to the health care benefits management industry in North America. Wall Street firms believe the company’s growth profile, potential upside to synergy targets from recent acquisitions and the chance to expand into the large employer market should drive outperformance in shares, and it may benefit from its position in the Affordable Care Act. The Credit Suisse target price is $54. The consensus estimate is slightly lower at $53.66. Catamaran closed Thursday at $43.85.
Express Scripts Holding Co. Inc. (NASDAQ: ESRX) is a portfolio manager’s favorite on Wall Street, as it is one of the top portfolio names in Leon Cooperman’s Omega Fund and is the third largest holding in David Rolfe’s Wedgewood Partner Hedge Fund. The company offers healthcare management and administration services on behalf of its clients. It operates in two segments, PBM and Other Business Operations. The Credit Suisse price target is $80, and the consensus target is $79.26. Express Scripts closed Thursday at $71.06.
McKesson Corp. (NYSE: MCK) delivers pharmaceuticals, medical supplies and HCIT to the health care industry primarily in the United States. In many analysts’ view, McKesson’s operations and underlying fundamentals are as strong as any in the business, such that shares warrant at least a similar multiple to the group average. Investors receive a small 0.50% dividend. The Credit Suisse price target is $200, while the consensus target is $202.63. McKesson closed Thursday at $188.57.
Omnicare Inc. (NYSE: OCR) operates as a health care services company that specializes in the management of pharmaceutical care in the United States and Canada. The company operates in two segments: Long-Term Care Group and Specialty Care Group. It provides pharmaceuticals and related pharmacy and ancillary services to long-term care facilities, as well as chronic care facilities and other settings. Investors are paid a 1.3% dividend. The Credit Suisse price target is $68, while the consensus target is $66.67. Omnicare closed Thursday at $63.52.
The common thread for all of these top stocks to buy is they are ancillary operators that deal with patient needs by providing medicines, medical and surgical products and other items used in the care of a patient. They themselves do not actually care directly for the patient. That removes liability to a large degree and helps them focus on margin gains. With an aging population, customer and patient needs will only continue to grow.