Yahoo Finance 2 Medical Stocks to Consider Buying Before Earnings
Many stocks in the medical sector have been able to outperform the broader market over the last year as healthcare continues to be a vital part of the economy.
There is a continued need for prosperous healthcare companies. Here are two medical stocks investors may want to consider buying ahead of earnings this week.
McKesson MCK
To start, investors may want to consider buying health care services and information technology company McKesson Corporation which is set to report its fiscal Q3 earnings on February 1.
McKesson’s Medical-Dental Supplies Industry is currently in the top 30% of over 250 Zacks industries and MCK stock also sports a Zacks Rank #2 (Buy) with earnings estimate revisions trending higher.
Standing out among the Medical sector as a diversified healthcare provider, McKesson’s Distribution Solutions segment primarily distributes pharmaceutical drugs, medical-surgical supplies, and other healthcare-related products globally with its Technology Solutions segment providing enterprise-wide clinical, patient care, financial, supply chain, and strategic management software solutions.
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Q3 Preview: McKesson’s fiscal Q3 earnings are expected at $6.34 per share, which would be a 3% increase from Q3 2022. Fiscal 2023 earnings are now projected to be up 4% and rise another 6% in FY24 at $26.36 a share.
On the top line, Q3 sales are forecasted to be $70.48 billion, up 3% from the prior year quarter. Total sales are now anticipated to be up 4% in FY23 and rise another 4% in FY24 to $286.53 billion. More impressive, Fiscal 2024 would represent 33% growth from pre-pandemic levels with 2019 sales at $214.31 billion.
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Earnings ESP: The Zacks Expected Surprise Prediction indicates that McKesson could slightly top bottom-line estimates for its fiscal Q3 with the Most Accurate Estimate at $6.36 per share and the Zacks Consensus having EPS at $6.34.
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Takeaway: The top and bottom line growth for McKesson continues to be very impressive at this stage in the company’s corporate life. Even better, trading around $380 per share and 15.3X forward earnings, MCK stock trades nicely below its decade high of 22.1X and closer to the median of 12.2X.
McKesson’s valuation is reason to believe there could still be more upside for McKesson stock, with MCK up +48% in the last year to largely outperform the S&P 500’s -11%. Plus, MCK’s +269% over the last decade also beats the benchmark’s +173%.
Sanofi SNY
Another medical stock investors will want to pay attention to before its Q4 earnings on February 3 is the pharmaceutical company Sanofi.
Sanofi primarily manufactures and markets prescription drugs in Europe and the United States with SNY stock sporting a Zacks Rank #2 (Buy) as earnings estimates have continued to go up over the quarter for its current fiscal 2022 and FY23.
Sanofi’s prescription drugs focus on major therapeutic areas such as multiple sclerosis, cardiovascular, immunology, neurology, oncology, rare disease, rare blood disorders and diabetes, among others. Sanofi’s Large Cap Pharmaceuticals Industry is currently in the top 38% of all Zacks Industries.
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Q4 Preview: Sanofi’s Q4 EPS is expected at $0.90 a share, up 14% from Q4 2021 earnings of $0.79 a share. Even better, this would round out fiscal 2022 earnings at $4.32 per share, an 11% YoY increase with FY23 EPS projected to rise another 2%.
Fourth-quarter sales are forecasted to be $11.51 billion, up roughly 1% from the prior year quarter. Total sales would be up 3% YoY for FY22 and are projected to rise another 3% in FY23 to $47.43 billion. Plus, with 2019 sales at $42.14 billion, FY24 would represent 12% growth.
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Earnings ESP: Sanofi is expected to top Q4 earnings expectations with The Zacks Consensus at $0.90 per share and the Most Accurate Consensus at $0.93 a share.
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Takeaway: Sanofi looks poised to have a strong Q4 report in terms of year-over-year growth, and topping bottom-line expectations for an 8th consecutive quarter could help SNY stock rally. There certainly appears to be more upside with shares of Sanofi trading around $48 and just 10.9X forward earnings.
Sanofi stock trades 36% below its decade-long high of 17.2X and at a 20% discount to the median of 11.9X. While SNY’s decade price return performance is virtually flat to largely underperform the S&P 500, past performance is not an indicator of future success. Over the last year, Sanofi is down -6% but this has outperformed the benchmark, and its attractive valuation points to more upside ahead.
Bottom Line
These medical stocks look attractive before earnings, with both McKesson and Sanofi standing out from a valuation standpoint which could justify more upside especially if they can beat expectations and offer positive guidance. The possibility of such looks more plausible with annual earnings estimates trending higher and both companies expected to top bottom-line expectations.
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