The healthcare sector is often considered a defensive play, with healthcare stocks to buy offering stability and growth potential even during economic downturns. The sector’s strength is driven by an aging global population, rising healthcare expenditures, and advancements in medical technology. This combination fuels a constant demand for innovation and care, setting the stage for sustained growth for healthcare stocks.
Notably, the Health Care Select Sector SPDR Fund (NYSEARCA:XLV), the largest healthcare exchange-traded fund (“ETF”), has gained 7% year to date (“YTD”). This return demonstrates a clear appetite for exposure to the promising landscape of U.S. healthcare stocks. Meanwhile, within this dynamic sector, certain companies stand out. These “healthy” healthcare stocks exhibit robust fundamentals, innovative approaches, and a clear vision for future success. Therefore, today, we explore three of the healthiest healthcare stocks to buy for a significant dose of profits.
Top Healthcare Stocks to Buy: Elevance Health (ELV)
First up on our list of healthcare stocks to buy is Elevance Health (NYSE:ELV), formerly known as Anthem. Elevance Health operates as a health benefits company, supporting consumers, families, and communities across the entire care journey. The company focuses on preventative care, disease management, and integrated wellness programs.
Elevance reported strong financial results for the first quarter of 2024. Operating revenue grew 0.9% year-over-year (“YOY”) to $42.3 billion. The company delivered adjusted diluted earnings per share (“EPS”) of $10.64, reflecting a 12.5% growth. Additionally, it increased its EPS guidance, targeting adjusted diluted EPS of over $37.20 for the full year.
This year, Elevance Health made strategic moves to strengthen its position. In March, it acquired Paragon Healthcare, enhancing its infusion services and specialty pharmacy capabilities. In April, Elevance formed a strategic partnership with Clayton, Dubilier & Rice. This partnership aims to improve health outcomes with a focus on value-based care and a holistic approach.
So far in 2024, ELV stock has gained around 13% and offers a 1.2% dividend yield. Shares are changing hands at 14.2 times forward earnings and 0.7 times sales. Meanwhile, Wall Street has a 12-month median price forecast of $604.50 for ELV stock, suggesting a 13% upside potential.
HCA Healthcare (HCA)
Next on our list of healthcare stocks to buy is HCA Healthcare (NYSE:HCA), the largest for-profit hospital operator stateside. The company runs a vast network of healthcare facilities, including general and acute care hospitals, psychiatric hospitals, and outpatient healthcare facilities.
HCA’s latest financials demonstrated broad-based volume growth and solid operating margins in the first quarter of 2024. Revenues reached $17.34 billion, up 11.2% from the prior-year quarter. Adjusted net income grew 3.8% to $1.44 billion. Adjusted diluted EPS increased 8.7% to $5.36. Cash flows from operating activities were $2.469 billion, compared to $1.803 billion a year ago.
Investors have paid attention to a collaborative study led by HCA Healthcare and funded by the Centers for Disease Control and Prevention (“CDC”). The study, involving 82 hospitals, achieved breakthroughs in outbreak detection and antibiotic targeting. Researchers developed an algorithm for rapid outbreak identification and response, enhancing patient safety. Additionally, two clinical trials identified a precise method for selecting antibiotics for pneumonia and urinary tract infections.
HCA stock has surged more than 24% this year. Shares are trading at 16.50x forward earnings and 1.4x sales. Analysts have set a 12-month price target of $357 for HCA, signaling a 6% potential upside.
McKesson Corporation (MCK)
Rounding out our discussion of healthcare stocks is McKesson Corporation (NYSE:MCK), a major player in the North American pharmaceutical distribution landscape. The company operates through four primary segments: U.S. Pharmaceutical, International, Medical-Surgical Solutions, and Prescription Technology Solutions (RxTS). McKesson’s extensive portfolio includes the distribution of branded, generic, specialty, biosimilar, and over-the-counter pharmaceutical drugs, as well as medical-surgical supplies.
In May, McKesson reported fourth-quarter fiscal 2024 earnings. Total revenues were $76.4 billion, an increase of 11% on the back of strong U.S. pharmaceutical sales driven by increased prescription volumes. Due to a higher tax rate, adjusted diluted EPS dropped 14% to $6.18.
Wall Street is noting that McKesson has been proactive in forming strategic partnerships and expanding its service offerings. The company extended its pharmaceutical distribution partnership with the Optum segment of UnitedHealth Group (NYSE:UNH) through a 5-year contract starting in July 2024. Additionally, McKesson, through its Sarah Cannon Research Institute joint venture, has collaborated with AstraZeneca (NASDAQ:AZN) to enhance oncology clinical trials within the U.S. Oncology Network.
YTD, MCK stock has soared 30% and is trading at all-time highs. Yet, the current valuation still appears appealing at 19.01x forward earnings and 0.26x sales. Interested readers may regard a potential dip below the $600 level as a better entry point into the MCK share price.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.