S&P Stealth Outperformers: Health Care

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It’s well known that the S&P 500 Index (SPX) has posted major gains this year, with the tech stocks leading all S&P sectors by rising 21.5% through Monday, per S&P Dow Jones Indices. What’s not commonly known is that health care stocks are one of the three S&P sectors – along with tech and consumer discretionary stocks – that also have outperformed the broader index this year. The S&P 500 Health Care Index (S5HLTH) posted 15.8% for this year through Monday, per S&P Dow Jones Indices. All these figures exclude dividends.

The gain in health care stocks seems all the more remarkable given the uncertain outlook for the Trump administration’s efforts to repeal and reform Obamacare, a battle that continues despite Trump’s latest failed efforts.

The top five S&P 500 health care stocks over this time period have been biotech company Vertex Pharmaceuticals Inc. (VRTX), up 77.8%, healthcare supplies company Align Technology Inc. (ALGN), up 60.5%, surgical equipment company Intuitive Surgical Inc. (ISRG), up 50.1%, managed care company Centene Corp. (CNC), up 46.5%, and life sciences tools and services company Mettler-Toledo International Inc. (MTD), up 44.5%.

Vertex Pharmaceuticals

Vertex specializes in small molecule drugs for serious diseases including cancer, cystic fibrosis, Huntington’s disease and multiple sclerosis. First-quarter EPS were 325% of the consensus estimate, and revenues were 79.5% greater than the same quarter in 2016. Revenues from treatments for cystic fibrosis, the leading source of Vertex’s revenues, were up 22%. (For more, see also: Vertex Q1 Earnings Top, CF Products Sales Strong.)

Align Technology

Align manufactures advanced scanners and CAD/CAM devices for use in dentistry and orthodontics, as well as systems for dental records storage. First-quarter adjusted EPS were 70.0% above the year-ago figure, and 26.9% above the consensus estimate. Revenues were up 30.0% year-over-year, and beat the estimates by 4.5%. Gross margin was up by 25 basis points, rising to 75.1%. (For more, see also: Align Technology Beats on Q1 Earnings and Revenues.)

Intuitive Surgical

Intuitive Surgical develops, manufactures and markets da Vinci Surgical Systems, which use robotic technology to give surgeons the ability to perform operations with smaller, more precise incisions than can be made by hand. The company is expected to report second-quarter earnings after the close on July 20.

The company beat the consensus EPS estimate by 17.63% in the first quarter, and has averaged a positive surprise of 14.44% in the trailing four quarters. A key driver is the increasing use of its da Vinci Surgical System, with the number of procedures up worldwide by about 18% in the first quarter. The company expects full year 2017 growth in da Vinci procedures of 12% to 14%. (For more, see also: Will Intuitive Surgical Surprise in Q2 Earnings?)

Centene

Centene provides services in support of government-sponsored healthcare programs, such as Medicaid and Medicare, as well as for private employers. First-quarter revenues were up 69% year-over-year, and earnings were up 51%, primarily due to the acquisition of insurer Health Net Inc. Adjusted EPS was 5.7% above the consensus estimate. (For more, see also: Centene Beats Q1 Earnings on Health Net Acquistion.)

Mettler-Toledo

​Mettler-Toledo manufactures and markets precision instruments for use in laboratories and production processes, with applications in food, drugs and other industries. In the first quarter, the company beat the consensus adjusted EPS estimate by 8.4% and the revenue estimate by 4.3%.

Strong results were reported across all product lines and regions, and revenues were up 10.2% year-over-year. The company has been cited by Zacks Investment Research for its focus on product development and cost control, as well as for operational excellence programs. (For more, see also: Mettler-Toledo Beats Q1 Earnings, Revenue Estimates.)

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S&P Stealth Outperformers: Health Care

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