The following healthcare picks —ZTS, SYK, LLY— have solid fundamentals and resilient enough growth profiles to be worthy of consideration, even as the rest of the market hits the panic button over the possibility that rates could stay elevated for another quarter. As high rates derail the stock market rally, don’t overlook these resilient healthcare firms, which boast low betas (indicating less correlation to the rest of the stock market), carve out a path higher.
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Therefore, let’s check with TipRanks’ Comparison Tool to determine which healthy Strong Buy stock is the better bet for the year ahead.
Zoetis (NYSE:ZTS)
Zoetis is a leader in the niche animal healthcare market. The stock has been really underwhelming over the past three months, sagging 10% as the market rallied. Undoubtedly, the latest first-quarter earnings beat estimates (earnings per share of $1.38 vs. the $1.35 consensus), while revenue rose 10% to $2.2 billion, also ahead of the $2.1 billion expectation. Still, the overhang from previously reported illness-causing concerns surrounding pet arthritis drugs remains, even as Zoetis has claimed their product is “safe and effective.”
At this juncture, I’d take the company’s word for it. The pain treatment certainly sounds a heck of a lot better than the risks. With the stock in the doghouse now, down 32% from its 2021 all-time high, I’m inclined to stay bullish.
Moving ahead, Zoetis has an opportunity to expand upon Librela and Solensia for cats and dogs. If recent safety concerns surrounding the drugs don’t curb demand, these drugs could pull in more than $1 billion in revenue annually. That’s some serious needle-moving upside, but only time will tell if there’s anything more to come from potential safety woes reported by some pet owners.
At 29.6 times forward price-to-earnings (P/E), you’re getting a well-run company that has the means to power right back to prior highs as new drugs look to make their mark.
What Is the Price Target for ZTS Stock?
ZTS stock is a Strong Buy, according to analysts, with eight unanimous Buys assigned in the past three months. The average ZTS stock price target of $205.00 implies 21% upside potential.
Stryker (NYSE:SYK)
From pet care to medical devices, we have Stryker, which has been doing exceptionally well lately. The stock is closing in on all-time highs again, and with a major upgrade from Needham delivered last week, there are a multitude of reasons to stay bullish on SYK stock for the year ahead.
As part of Needham’s SYK stock recommendation upgrade to Buy from Hold, the firm noted double-digit organic sales growth potential. New product launches, a healthy backlog, and potential for acquisition were also cited as the top reasons to stick with the stock as it gains traction. I couldn’t agree more. M&A and new launches alone are enough reasons to buy shares of the winner poised to keep on winning in the year ahead.
Additionally, management is operating exceptionally well, boasting a strong adjusted operating income margin of 21.9% (up 80 bps) in Q1 2024. At 28.6 times forward P/E, SYK stock goes for a slight premium to the medical device industry average of 22.7 times. However, given the many catalysts and exceptional stewardship, such a premium is well worth paying, even with shares close to new highs.
What Is the Price Target for SYK Stock?
SYK stock is a Strong Buy, according to analysts, with 15 Buys and four Holds assigned in the past three months. The average SYK stock price target of $381.47 implies 12% upside potential.
Eli Lilly (NYSE:LLY)
Eli Lilly is one of the hottest health stocks and one of the market’s newest darlings, thanks in large part to its exposure in the weight-loss (GLP-1) drug space. It’s an explosive market, just like AI, and one where its market leaders are more than deserving of a premier price tag. As such, I remain bullish on LLY stock.
At writing, LLY stock boasts a high multiple at just shy of 60 times forward P/E, well above the two other health stocks mentioned in this piece. Still, LLY stock deserves the premium, given the potential for Lilly to pole-vault past expectations in a bull-case scenario that sees Lilly dominate the GLP-1 scene. LLY aims to outdo Mounjaro, Zepbound, and other leading offerings on the market, including Ozempic and Wegovy, with next-generation candidates in the pipeline.
For now, there’s a ton of room to grow in weight loss drugs, with the market forecasted to surge to $150 billion by the early 2030s from $24 billion last year. That’s some serious growth that may be Lilly’s for the taking. Of course, a growing number of rivals are getting in on the action, but none, I believe, have the odds of success as Eli Lilly, in my opinion. Of late, Lilly has been ramping up in a big way, with $5.3 billion to be dropped on a manufacturing plant.
What Is the Price Target for LLY Stock?
LLY stock is a Strong Buy, according to analysts, with 18 Buys and two Holds assigned in the past three months. The average LLY stock price target of $886.56 implies 8.8% upside potential.
The Takeaway
The following healthcare stocks are looking quite strong going into the second half of the year. With the thumbs up from the analyst community and a number of timely catalysts, I’d not hesitate to nibble at shares of each one of the names mentioned. Of the trio, analysts expect Zoetis stock to have the most to gain in the next 12 months.
