The healthcare sector has benefited from higher volumes, improved occupancy and several expansion initiatives in 2024. A significant uptick in elective surgeries and non-urgent procedures led to a volume rise. Advancements in technology, focus on consumer-centric healthcare models and improving health equity have benefited companies in the healthcare space. However, workforce shortages and margin pressures, coupled with regulatory uncertainty, continue to weigh on the companies’ prospects.
A key trend in 2024 is the continued adoption of digital health technologies, which are revolutionizing how healthcare is delivered. From telehealth to AI-driven tools and electronic health records (EHR), the integration of digital platforms is enabling healthcare providers to improve patient experiences and enhance operational efficiencies. In particular, generative AI (gen AI) is gaining traction and is being used for administrative tasks like claim processing and clinical applications, such as personalized treatment planning.
Despite the government’s initiatives to lower inflation by cutting interest rates, the healthcare industry is struggling with rising medical costs. To address this, healthcare organizations are exploring ways to expand access through digital health solutions, improve cost transparency and develop products to cater to a broader range of consumers. Per the Deloitte 2024 Health Care Consumer Survey, men and women avoid care due to cost and affordability concerns. Investing in virtual care is a time-opportune move as 64% of consumers find virtual visits convenient, per Deloitte’s 2024 US Health Care Consumer survey.
Trends like preventive care, reduced recovery times, improved patient outcomes and growth in robotics surgery bode well for companies like Veracyte and Globus Medical. Expansion projects in the healthcare sector are gaining momentum as organizations look to enhance capacity, improve patient care, and adapt to growing inpatient and outpatient demand. The sector also witnessed heightened merger and acquisition activity as companies sought to consolidate resources and achieve operational synergies, setting the stage for long-term growth.
Potential policy changes under the new administration could significantly impact the profitability of healthcare companies, creating a sense of uncertainty within the sector. Concerns about government spending cuts, reduced hospital funding and the expiration of insurance subsidies could pressure profit margins for healthcare providers.
The Zacks Medical Sector has declined 2.4% year to date, starkly contrasting with the S&P 500 Index’s robust 25.8% growth.
YTD Stock Price Performance of Zacks Medical Sector
Zacks Investment Research
Image Source: Zacks Investment Research
We have selected five healthcare stocks — Veracyte, Inc. VCYT, Globus Medical, Inc. GMED, Encompass Health Corporation EHC, Pediatrix Medical Group, Inc. MD and The Ensign Group, Inc. ENSG — which have the perfect combination of growth and stability that investors can take advantage of in 2025.
These companies currently sport a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Veracyte: Headquartered in California, the company benefits from strong growth potential, driven by its market-leading Decipher Prostate and Afirma tests, which delivered impressive revenue increases and record quarterly volumes, in the third quarter. The expansion of its gross and operating margins indicates operational efficiency and a solid market position. This Zacks Rank #1 company’s strong cash position and ability to manage costs effectively suggest a solid foundation for investments and continued innovation in the diagnostics space.
The Zacks Consensus Estimate for Veracyte’s current-year earnings is pegged at 38 cents per share, indicating a 137.3% year-over-year upsurge. It has witnessed three upward estimate revisions in the past 60 days against none in the opposite direction. VCYT beat the Zacks Consensus Estimate for earnings in the last four quarters, with an average surprise of 520.6%.
Average Broker Recommendation: 1.86
Last Closing Price: $39.53
Veracyte, Inc. Price and EPS Surprise
Veracyte, Inc. price-eps-surprise | Veracyte, Inc. Quote
Globus Medical: Headquartered in Pennsylvania, the company benefits from the successful integration of NuVasive, robust sales of spine products and the increasing adoption of enabling technologies like Excelsius GPS and E3D systems. The company’s expanded product portfolio, collaborations and enhanced internal development processes position it well for sustained innovation and market expansion. The Zacks Rank #2 company’s raised guidance should further boost its prospects.
The Zacks Consensus Estimate for Globus Medical’s current-year earnings is pegged at $2.97 per share, indicating 28% year-over-year growth. It has witnessed seven upward estimate revisions in the past 60 days against none in the opposite direction. GMED beat the Zacks Consensus Estimate for earnings in the last four quarters, with an average surprise of 17.7%.
Average Broker Recommendation: 1.80
Last Closing Price: $81.78
Globus Medical, Inc. Price and EPS Surprise
Globus Medical, Inc. price-eps-surprise | Globus Medical, Inc. Quote
Encompass Health: Headquartered in Alabama, EHC has showcased a robust performance in the past few quarters, driven by strong discharge growth, higher adjusted EBITDA and strategic expansion through hospital openings and bed additions. The company’s focus on operational efficiency is evident from its improved net and comprehensive income and adjusted free cash flow. The raised 2024 guidance for revenues, EBITDA and EPS, along with robust long-term growth targets, bode well for this Zacks Rank #2 company.
The Zacks Consensus Estimate for Encompass Health’s current-year earnings is pegged at $4.28 per share, indicating 17.6% year-over-year growth. It has witnessed nine upward estimate revisions in the past 60 days against none in the opposite direction. EHC beat the Zacks Consensus Estimate for earnings in the last four quarters, with an average surprise of 13.6%.
Average Broker Recommendation: 1.08
Last Closing Price: $94.31
Encompass Health Corporation Price and EPS Surprise
Encompass Health Corporation price-eps-surprise | Encompass Health Corporation Quote
Pediatrix Medical: Headquartered in Florida, MD continues to exhibit strong growth in same-unit revenues, improved reimbursement-related factors and a notable rise in profits. The decline in practice salaries and benefits underscores efficient cost management. The company’s solid operating cash flow and strengthened cash position provide financial stability. Growth in adjusted EBITDA and continued focus on operational restructuring, strengthens the prospects of this Zacks Rank #2 company.
The Zacks Consensus Estimate for Pediatrix Medical’s current-year earnings is pegged at $1.35 per share, indicating 7.1% year-over-year growth. It has witnessed six upward estimate revisions in the past 60 days against none in the opposite direction. MD beat the Zacks Consensus Estimate for earnings in three of the last four quarters and met once, with an average surprise of 9.9%.
Pediatrix Medical Group, Inc. Price and EPS Surprise
Pediatrix Medical Group, Inc. price-eps-surprise | Pediatrix Medical Group, Inc. Quote
Ensign: Headquartered in California, ENSG continues to be supported by strong performance in its Skilled Services segment, driven by improved occupancy and patient days. Ensign’s consistent revenue growth (projected at 14.1% for 2024), alongside the raised adjusted EPS forecast, demonstrates its operational efficiency and resilience. Additionally, its focus on acquisitions and growing rental revenues signals the potential for further expansion and value creation, making this Zacks Rank #2 company an attractive prospect.
The Zacks Consensus Estimate for Ensign’s current-year earnings is pegged at $5.49 per share, indicating 15.1% year-over-year growth. It has witnessed four upward estimate revisions in the past 60 days against none in the opposite direction. ENSG beat the Zacks Consensus Estimate for earnings in the last four quarters, with an average surprise of 1.3%.
Average Broker Recommendation: 1.50
Last Closing Price: $136.41
The Ensign Group, Inc. Price and EPS Surprise
The Ensign Group, Inc. price-eps-surprise | The Ensign Group, Inc. Quote
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