Take Advantage of the Dip and Buy These 4 Beaten-Down Healthcare Stocks

The healthcare industry is still reeling under an acute scarcity of skilled labor and other logistical disruptions. However, demand for healthcare services continues to grow consistently due to rising chronic diseases and an aging population.

With increased health awareness thanks to the COVID-19 pandemic, demand for advanced diagnostics, treatment, and research is soaring. And investors’ interest in this space is evident in the iShares U.S. Healthcare Providers ETF’s (IHF) 4.1% returns in the past six months versus the SPDR S&P 500 ETF Trust’s (SPY) 0.1% decline.

So, it could be wise to bet on beaten-down stocks West Pharmaceutical Services, Inc. (WST), Bio-Rad Laboratories, Inc. (BIO), Quest Diagnostics Incorporated (DGX), and Masimo Corporation (MASI), which we think hold solid upside potential.

Click here to checkout our Healthcare Sector Report for 2022

West Pharmaceutical Services, Inc. (WST)

WST in Exton, Pa., designs and produces containment and delivery systems for injectable drugs and healthcare products in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company has two segments, Proprietary Products and Contract-Manufactured Products. 

On Jan. 25, 2022, WST announced an exclusive supply and technology agreement with Corning Incorporated (GLW). Eric M. Green, President, and CEO, WST, said, "West and Corning have developed this exceptional collaboration to offer leading elastomer-glass system solutions for the containment and delivery of injectable medicines. At West, we value the state-of-the-art products offered by Corning and are excited to build together the next generation of integrated packaging and delivery innovations."

WST’s net sales increased 28.9% year-over-year to $706.50 million for the third quarter, ended Sept. 30, 2021. Its operating profit came in at $181.40 million, up 82.9% year-over-year. The company’s adjusted net income increased 79.8% year-over-year to $156.80 million, while its adjusted EPS came in at $2.06, up 79.1% year-over-year.

Analysts expect WST’s revenue to increase 8.8% to $3.07 billion in 2022. Its EPS is estimated to increase 27.6% per annum for the next five years. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past five trading days, the stock has declined 6.5% in price to close yesterday’s session at $379.32.

WST’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

WST has a B grade for Growth, Quality, and Sentiment. In the Medical - Devices & Equipment industry, it is ranked #27 of 166 stocks. Click here to see the additional POWR Ratings for Value, Momentum, and Stability for WST.

Bio-Rad Laboratories, Inc. (BIO)

BIO manufactures and distributes life science research and clinical diagnostic products in the United States, Europe, Asia, Canada, and Latin America. The company operates through Life Science and Clinical Diagnostics segments. BIO is headquartered in Hercules, Calif.

BIO’s total assets came in at $17.78 billion for the period ended Dec. 31, 2021, compared to $12.97 billion for the period ended Dec. 31, 2020. Its short-term investments were $404.69 million, compared to $334.47 million for the same period in the prior year. Also, its other investments came in at $14.39 billion, compared to $9.56 billion in the prior year.

For its fiscal 2023, BIO’s revenue is expected to grow 4% year-over-year to $3.02 billion. Its EPS is estimated to increase 17.8% per annum for the next five years. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past month, the stock has declined 2.5% in price to close yesterday’s trading session at $612.69.

According to our POWR Ratings, BIO has an A grade for Sentiment. It is ranked #14 of 56 stocks in the Medical - Diagnostics/Research industry. Click here to see additional POWR Ratings for BIO (Growth, Value, Momentum, Stability, and Quality).

Quest Diagnostics Incorporated (DGX)

DGX in Madison, N.J. provides diagnostic testing, information, and services in the USA and internationally. It also develops and delivers diagnostic information services, like routine testing, non-routine and advanced clinical testing, anatomic pathology testing & other diagnostic information services.

On Feb. 3, 2022, Steve Rusckowski, Chairman, CEO, and President, said, “Quest is well-positioned in 2022 to deliver on our commitments. Our guidance for 2022 reflects lower demand for COVID-19 testing services; growth in the base business; and the impact of the previously announced one-year delay of PAMA cuts, partially offset by investments to accelerate growth.”

DGX’s base business revenues increased 9.3% year-over-year to $2.02 billion for its fiscal fourth quarter, ended Dec. 31, 2021. Its goodwill came in at $7.09 billion for the period ended Dec. 31, 2021, compared to $6.87 billion for the period ended Dec. 31, 2020. Furthermore, its total current liabilities came in at $1.75 billion, compared to $1.78 billion, for the same period in the prior year.

DGX surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 7.4% in price to close the last trading session at $131.72.

DGX has a B grade for Value and Quality in our POWR Ratings system. It is ranked #10 of 56 stocks in the Medical - Diagnostics/Research industry. Click here to see the additional POWR Ratings for DGX (Momentum, Growth, Sentiment, and Stability).

Masimo Corporation (MASI)

An Irvine, Calif.-based global medical technology company, MASI develops, manufactures, and markets noninvasive monitoring technologies and hospital automation solutions worldwide. It aims to improve patient outcomes while reducing the cost of care simultaneously.

On Feb. 15, 2022, Joe Kiani, Chairman and CEO, MASI, said, “While 2021 was a very challenging year in global healthcare and for millions of patients, we were able to help ease the burden on hospitals and caregivers by providing them with our breakthrough technologies. Our team truly demonstrated our commitment to our mission and guiding principles by putting our customers and patients’ priorities first.”

MASI’s product revenue increased 11% year-over-year to $327.58 million for the fourth quarter, ended Jan. 1, 2022. Its non-GAAP net income came in at $70.06 million, up 22.3% year-over-year, while its non-GAAP EPS was $1.21, up 23.5% year-over-year.

Analysts expect MASI’s revenue to increase 9.4% to $1.36 billion in 2022. Its EPS is expected to increase 13.4% to $4.91 in 2023. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has retreated 38.1% in price to close yesterday’s trading session at $144.20.

Under POWR Ratings, MASI has been accorded a “B” rating for Quality. Within the Medical - Devices & Equipment industry, it is ranked #45 of 166 stocks. Click here to see the additional POWR Ratings for Value, Sentiment, Momentum, Growth, and Stability for MASI.

Click here to checkout our Healthcare Sector Report for 2022