The healthcare scene is home to some pretty defensive companies that aren’t exactly shying away from medical innovation. With the following Strong-Buy-rated health stocks (ABT, DHR, and DXCM), investors may just be able to get growth, relative defensiveness, and decent multiples as we head into May 2024. Undoubtedly, investors may wish to come for the underestimated growth and stay for their ability to move higher, even as the market tides turn against most stocks in the market.
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Therefore, in this piece, we’ll check in with TipRanks’ Comparison Tool to gauge which firm has the most promising prospects and upside potential over the year ahead. Each health firm has a thumbs up from the analyst community at the time of writing, but which has the most room to run? Let’s find out.
Abbott Labs (NYSE:ABT)
Abbott Labs stock has been trying hard to escape its multi-year rut, with shares now down more than 24% from their late 2021 all-time high of $142.60. Undoubtedly, it’s been quite the slog, with the stock giving back all of the gains it enjoyed year-to-date following the most recent 11% correction off highs.
Nonetheless, the latest round of quarterly earnings were pretty good, as they topped analyst estimates. Rounding off the decent numbers was a nice raise in the low-end guidance for 2024, with earnings per share (EPS) now expected to be in the range of $4.55-4.70, up from the original $4.50-4.70.
It’s not the biggest guidance hike in the world, but it’s one that I thought should have been respected by investors. As a part of the guidance hike, Abbott also hiked its low-end organic sales growth (minus its COVID-19 testing-related business) guide by half a percentage point.
Clearly, investors were expecting a bit more. And while the slight hint of enthusiasm paints a prettier picture for the rest of the year, I do think that value hunters should be more willing to look past the sagging COVID-19 testing business for growth. After a pretty muted reaction to decent results, I’m inclined to be bullish on ABT stock.
The company has made some remarkable strides in the infant formula market, regaining its leadership. Additionally, FreeStyle Libre (for diabetes monitoring) and the Aveir (a pacemaker) remain hot medtech devices for the firm. Add the recent FDA approval for TriClip (for heart valve repairs) into the equation, and I do think there’s a lot for value-conscious growth investors to love in ABT stock for the year ahead.
What Is the Price Target for ABT Stock?
ABT stock is a Strong Buy, according to analysts, with 11 Buys and one Hold assigned in the past three months. The average ABT stock price target of $128.83 implies 20.1% upside potential.
Danaher (NYSE:DHR)
Danaher stock has been enjoying some newfound momentum since falling into a mild multi-year rut after peaking in 2021. Undoubtedly, Danaher is also feeling a pinch as sales of COVID-19-related products continue to see a drastic winddown. Even management expects more moderation from here “as the pandemic has evolved toward endemic status.”
Fortunately, Danaher has no shortage of growth levers to pull over the next year or so as it aims to keep powering the stock’s recovery rally. Most analysts are staying aboard as DHR stock now, and I share the bullishness of the analyst community as we march into May.
Earlier this week, the company clocked in its own earnings results, which were met with great applause, with shares popping more than 7%, only to give back 1% the following day. Indeed, Q1 saw a solid earnings beat, with $1.92 EPS ahead of the $1.72 estimate. That said, it wasn’t all roses, as management cautioned that its next quarter is expected to see sales slow a bit (by a mid-single-digits percentage).
The slightly cautious tone, I believe, could set the stage for a more substantial beat down the road as Danaher’s major growth drivers begin to steal the show.
Most notably, Cytiva, formerly GE Healthcare Life Sciences, looks like it could become more of a needle mover now that it’s been in Danaher’s hands for a few years. Cytiva has a strong portfolio of promising products that are vital in the field of bioprocessing. All things considered, Danaher’s moat looks intact as it looks to move past headwinds that I view as mostly temporary in nature.
What Is the Price Target for DHR Stock?
DHR stock is a Strong Buy, according to analysts, with 11 Buys and three Holds assigned in the past three months. The average DHR stock price target of $271.43 implies 9.9% upside potential.
Dexcom (NASDAQ:DXCM)
Dexcom stock is coming off an impressive V-shaped recovery from its ugly 45% stock plunge suffered in the second half of last year. Undoubtedly, the diabetes management technology firm may still face a slight headwind as weight-loss drugs (like Ozempic and Wegovy) look to reduce the rate and severity of obesity (and, with it, diabetes) as more people get on the drugs.
Despite the potential Ozempic headwind, RBC (NYSE:RY) Capital Markets, which recently started DXCM stock as a Buy, still views the diabetes total addressable market (or TAM) as large enough to help the firm keep up its growth. I believe this to be right.
Dexcom has leading continuous glucose-monitoring (CGM) technology in a market that’s still surprisingly not too penetrated (around 60% for Type 1 diabetes, around 50% for Type 2, according to RBC). Indeed, I share RBC’s enthusiasm, even in the face of the long-term impact of weight-loss drugs.
After all, Ozempic isn’t a magical cure for obesity. It’s an expensive drug to stay on, and once people go off, there’s a high chance that the weight could be packed back on, thus increasing the risk of diabetes over the long run.
What Is the Price Target for DXCM Stock?
DXCM stock is a Strong Buy, according to analysts, with 13 Buys and one Hold assigned in the past three months. The average DXCM stock price target of $154.29 implies 20.2% upside potential.
The Takeaway
Large-cap healthcare innovators stand out as intriguing pick-ups for investors who want growth with a hint of defensiveness. Currently, analysts see the most gains to be had from DXCM over the year ahead, with 20.2% in expected upside. That’s quite a bit from a stock that’s a top innovator in the niche (and still not entirely penetrated) CGM market.
