With so much focus and attention geared toward the novel coronavirus and the COVID-19 pandemic, health care has been affected in many strange ways. Minimally invasive and elective procedures have been forcefully or voluntarily suspended, and the way in which care is being administered is seeing an unprecedented change.
Many companies have been winning by making progress toward treatments for and vaccines against the coronavirus. Others have struggled because COVID-19 fears are keeping patients from seeking health care in the same ways they had before the pandemic.
The health care stocks included in the S&P 500 index have added about 45% over the past 12 months. We’ve taken a look at five that continue to lag the sector and a couple that have caught fire recently. None of these companies is working on a COVID-19 treatment or vaccine.
Owens & Minor Inc. (NYSE: OMI) stock soared on Tuesday, adding 81% to the share price and posting a new 52-week high. The company produces medical and surgical supplies, including the personal protective equipment (PPE) that is currently so much in demand. In its earnings report, the company also noted that demand for supplies for elective procedures also had risen earlier than it had anticipated. The company doubled its adjusted earnings per share guidance. Analysts had been high on the stock, but Tuesday’s surge may cause some of them to pull back.
The stock’s price target is $6.21, but shares closed at $14.40 on Tuesday, after posting a new 52-week high of $15.40. The current multiple of 9.6 is based on an earnings per share (EPS) estimate for 2021 of $0.65. The company guided EPS to a range of $1.00 to $1.20 on Tuesday. Owens & Minor’s market cap currently sits at $907.3 million, and the company pays an annual dividend of $0.01 (0.13% yield).
Tandem Diabetes Care Inc. (NASDAQ: TNDM) is a medical device maker for insulin-related diabetes care. The company has reached long-term agreements with Abbott to use Tandem’s “plug-and-play” insulin delivery system, and United Healthcare will include Tandem’s insulin pumps in its Medicare Advantage and other insurance plans.
The stock closed at $103.72 on Tuesday, up about 1.2% for the day. Analysts have a consensus 2021 EPS estimate of $0.03, which yields a multiple of more than 3,400. At Tuesday’s closing price, the shares traded about 2.3% below their 52-week high. Tandem’s current 12-month price target is $102.46, but that is sure to rise.
Medtronic PLC (NYSE: MDT) makes and sells medical devices used by hospitals and physicians to treat cardiovascular diseases and diabetes, along with surgical and restorative therapy devices. The company has been sidelined because hospitals have delayed elective procedures. In some cases, the hospitals have forced the delays to preserve space for dealing with coronavirus patients. In other cases, the patients themselves have chosen to wait until the pandemic is brought under control.
Medtronic stock closed at $96.81 on Tuesday, nearly 21% below its 52-week high. With a consensus EPS estimate of $5.58, the stock is trading at around 19.7 times expected earnings. Medtronic’s market cap is around $127 billion, and the company pays an annual dividend of $2.32 (yield of 2.42%).
1Life Healthcare Inc. (NASDAQ: ONEM) is a membership-based primary care platform under One Medical. While open to direct consumers, the big growth is expected to result from employment-sponsored members where the platform is being promoted as a means of cheaper health care for large employers. Its market is barely penetrated and in only a few regions, so it has massive reach for new markets in the coming years.
At Tuesday’s closing price of $38.50, the stock is trading above its consensus price target of $33.25. The company is expected to lose $0.49 per share in 2021, but revenue growth has been projected to rise by 40% to more than $420 million next year.
DaVita Inc. (NYSE: DVA) provides dialysis services to patients with chronic kidney failure and end-stage renal disease. The company has Warren Buffett’s Berkshire Hathaway as a 31% stakeholder now. As dated and barbaric as it seems, kidney dialysis is still the mainstay treatment for adults with kidney failure and is expected to be for years. With millions of aging baby boomers, the demographics are working in the company’s favor, and there may be a boost to its pool of patients in the years ahead from the long-term damage to patients who have been sick by COVID-19.
The stock closed at $86.00 on Tuesday, less than a dollar shy of its consensus 12-month price target. Shares are trading at more than 13 times expected 2021 earnings and about 4.6% below the stock’s 52-week high of $90.15.
Walgreen Boots Alliance (NYSE: WBA) operates more than 13,000 drug stores in the United States and countries around the world. Like all retail stores, Walgreens has been hit hard by stay-at-home orders that have sharply cut foot traffic. When it reported second-quarter earnings earlier this month, Walgreens increased its dividend by 2.2% to $1.87 annually, for a yield of 4.63% at Tuesday’s closing share price. That’s enough to encourage patience among investors.
The stock closed at $40.41 on Tuesday, more than 37% below its 52-week high of $64.50. Based on a consensus 2021 EPS estimate of $5.41, the stock is trading at around eight times expected earnings.
Intuitive Surgical Inc. (NASDAQ: ISRG) designs, manufactures and sells robotic surgical systems and related instruments. When the company reported earnings last week, it noted that it had seen a significant decline in procedure volume and delay placements of new systems because health care systems are turning all their attention to COVID-19.
The company’s stock is up nearly 25% over the past 12 months, and it closed on Tuesday at $658.15, well above the consensus price target of $572.14. The shares trade at a multiple of nearly 43% to expected 2021 earnings and just 2.5% below their 52-week high.
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