The Zacks Analyst Blog Highlights: Intuitive Surgical, Illumina, HCA, Elanco Animal And Humana

For Immediate Release

Chicago, IL –January 16, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Intuitive Surgical Inc. (NASDAQ:ISRG) , Illumina, Inc. (NASDAQ:ILMN) , HCA Healthcare, Inc. (NYSE:HCA) , Elanco Animal Health Inc. (NYSE:ELAN) and Humana Inc. (NYSE:HUM) .

Here are highlights from Tuesday’s Analyst Blog:

5 Great Medical Stocks to Buy Ahead of Q4 Earnings

In 2018, health care stocks emerged as some of the best performers for the S&P 500, which itself closed the year in the red. Looking ahead, multiple headwinds are clouding the market outlook for the year 2019. These include the ongoing trade war with China, the interest rate situation and concerns about an impending global slowdown.

In the absence of a strong aggressive strategy to boost gains, it is better to adopt a strong defensive tactic to shore up hard won profits. Health care fits the bill perfectly, since it offers defensive growth over the longer term. This is why it is a good idea to pick up select stocks from the sector that are likely to outperform their earnings estimates.

Most Favored S&P 500 Sector of the Year

A Reuters review of 13 prominent Wall Street Research firms reveals that health care is the most favored of the S&P 500’s 11 major sectors at the start of 2019. These firms issue recommendations about what weight is to be assigned to these groups in investment portfolios.

Notably, in 2018, health care stocks in the S&P 500 gained 4.7%. Along with utilities, it was only of the two S&P 500 sectors to close 2018 in the green. The benchmark itself lost 6.2% last year.

A large section of analysts think the sector’s attractive valuations, sturdy balance sheets and steady dividends are major factors working in its favor. The group’s positive earnings outlook is another major positive even as it remains less vulnerable to cyclical downtrends compared to other sectors.

When the economy faces a slowdown, most investors avoid sectors that benefit from an upswing. However, they do not want to adopt an ultra-defensive stance. Health care fits the bill nicely with its diversified earnings stream, which helps in striking a healthy balance between risk and returns.

Diversified Earnings Stream Strikes Healthy Balance

The diverse nature of health care’s earnings stream stems from the variety of business under its huge umbrella. The sector’s width spans prescription drug makers, medical device manufacturers, medical insurers, hospitals and tool providers for scientific research.

In simple terms, this means that along with rock-steady options, large-cap pharma companies, the sector also includes such fast-growing categories as biotechs. Sectors such as these offer appreciably higher returns, along with a jump in risk, of course.

However, earnings and revenue growth for sectors across the board are expected to decelerate appreciably in the fourth quarter. For medical stocks, total Q3 earnings were up 13.2% on 7.6% higher revenues.

But total Q4 earnings for the sector are expected to be up 7.1% on 6% higher revenues. This represents a considerable decline in pace, but is still better than autos, conglomerates and utilities. Earnings growth for these sectors is set to decline 13.8%, 13.1% and 6.3%, respectively.

Notably, utilities stocks were among the best performers for the S&P 500 last year. The relatively superior earnings prospects of health care stocks bear out their favored status among the broader benchmark’s sectors this year.

For the S&P 500 index as a whole, total Q4 earnings are expected to be up 10.5% from the same period last year on 5.3% higher revenues. (Read: Zacks Investment Research

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Written By: Zacks Investment Research