Why You Should Add Two Medical Stocks to Your Watch List
Monday, May 6th, 2013
By Mitchell Clark, B.Comm. for Profit Confidential
There are still all kinds of earnings results pouring into the marketplace, and a lot of them are modestly decent.
Brand-name companies have mostly reported. There has been some broadening of the positive stock market action into the NASDAQ Composite Index.
The stock market’s breakout certainly was well evidenced by blue chips and transportation stocks. But another sector that has been particularly strong (and safe) is health care.
In medical instruments and supplies, specifically, Becton, Dickinson and Company (NYSE/BDX) reported solid earnings that beat consensus, and the company increased its guidance for the rest of the year. The company has 30,000 employees in over 50 countries.
According to the Franklin Lakes, New Jersey-based company, quarterly revenues grew to $2.0 billion for the second fiscal quarter (ended March 31, 2013). This represented an increase of 3.7% over the comparable quarter, and 4.1% without currency translation.
Company management said that its business confidence is growing and raised its fiscal 2013 full-year guidance.
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The company’s stock market chart is featured below:
Chart courtesy of www.StockCharts.com
More than 50% of the company’s revenues come from abroad. International sales in the most recent quarter were $1.2 billion, for a gain of 6.2% comparatively; these numbers reflect strength in the emerging markets, especially in diabetes care products.
Actual quarterly earnings were down a little bit due to a one-time charge. The company reported earnings from continuing operations of $1.39 per diluted share, compared to diluted earnings per share of $1.31, for a 6.1% gain year-over-year, or 7.6% on a foreign currency neutral basis.
But what the stock market was so enthused about was the company’s increased guidance for fiscal 2013.
Being a large-cap blue-chip company, Becton, Dickinson and Co. expects revenue gains of 4.5%–5.0% this fiscal year. Excluding currency translation, earnings per share are expected to increase 8.5%–9.0%.
Like many large-cap companies that broke out on the stock market at the beginning of the year, Becton, Dickinson and Co. has been soaring lately.
On the stock market, the position is not expensively priced, and the company has lots of cash in the bank.
Medical devices and healthcare stocks are sectors that are attractive for long-term portfolios. Demand for healthcare-related services is consistent, but it is very evident that some of the best growth is in the treatment of diabetes and kidney disease.
DaVita HealthCare Partners Inc. (NYSE/DVA) is the powerhouse kidney treatment business. It has increased 758% on the stock market over the last decade and is an earnings machine.
But considering new positions now with the stock market at record highs is unwise. (Read “Is Current Market Action Just the Calm Before the Storm?”)
However, these stocks do offer solid growth potential and would certainly be a lot more attractive if their share prices experienced a meaningful correction.
For sure, the earnings growth is there.
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