Undoubtedly, healthcare stocks may be crossing investors’ minds as many notable names like Pfizer (PFE), and Bristol Myers Squibb (BMY) continue to hover near 52-week lows.
Bristol Myers stock has fell -14% this year with Pfizer shares dropping -31% to vastly underperform the S&P 500 and Nasdaq’s strong performances.
The Nasdaq’s +33% YTD performance is indicative of investors fleeing areas like healthcare and flocking to tech stocks as inflation eases and the AI movement gains steam.
With that being said, the submerged performance of many stocks among the medical sector is shaping the space up to be a defensive hedge against volatility in broader markets. This could be especially true if economic headwinds momentarily reemerge. Plus, Encompass Health (EHC) and Vertex Pharmaceuticals (VRTX) are two medical stocks that have largely outperformed their peers this year and may still offer defensive safety as healthcare is always essential.
Year to date Encompass and Vertex stocks are up +16% and +24% respectively and have easily topped the broader indexes over the last year. This serves as a prelude to why it’s time to buy Encompass and Vertex stock with both companies beating their second-quarter top and bottom line expectations on Tuesday.
Encompass Health: As a provider of integrated healthcare services, Encompass crushed its Q2 earnings expectations. Earnings of $0.95 per share came in 28% above Q2 estimates of $0.74 a share. On the top line, sales of $1.18 billion beat expectations by 2%. Year over year, Q2 earnings rose 6% despite sales falling -11% from the prior-year quarter.
Offering facility-based patient care through its network of rehabilitation hospitals, analysts appear to be high on Encompass stock after Q2 results. Plus, the Average Zacks Price Target of $72.55 a share represents 7% upside from current levels and could be rising soon.
Furthermore, annual earnings are now expected to jump 12% this year and climb another 11% in fiscal 2024 at $3.54 per share. Total sales are forecasted to dip -3% in FY23 but rebound and rise 7% in FY24 to $5.10 billion.
Vertex Pharmaceuticals: Focused on developing drugs that target cystic fibrosis (CF) and other serious diseases Vertex also posted solid Q2 results on Tuesday.
Second-quarter earnings of $3.89 per share topped estimates by 1% with sales of $2.49 billion coming in 3% above expectations. More impressive, Q2 earnings were up 8% YoY with sales jumping 13%.
Vertex’s annual earnings are expected to dip -2% in FY23 but rebound and jump 9% in FY24 at $15.91 per share. Notably, FY24 EPS projections would represent 74% growth over the last five years with 2020 earnings at $9.03 per share.
Several analysts appear to be high on Vertex stock after earnings and are starting to raise their price targets. Currently, the Average Zacks Price Target of $375.70 a share offers 5% upside.
Following their favorable Q2 reports now looks like a good time to buy Encompass Health and Vertex Pharmaceuticals stock. With price targets rising and earnings estimate revisions remaining higher their strong stock performances should continue as we progress through 2023.
Vertex Pharmaceuticals Incorporated (VRTX): Free Stock Analysis Report
Encompass Health Corporation (EHC): Free Stock Analysis Report
Bristol Myers Squibb Company (BMY): Free Stock Analysis Report
Pfizer Inc. (PFE): Free Stock Analysis Report
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Zacks Investment Research
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