The aging population significantly bolsters the healthcare industry, as older adults typically need more medical attention and specialized care. This heightened demand encompasses primary care, long-term care facilities, home healthcare services, and pharmaceuticals.
Given this backdrop, it could be wise to consider fundamentally strong healthcare stocks, Johnson & Johnson (JNJ), AbbVie Inc. (ABBV), and Merck & Co., Inc. (MRK).
Globally, population aging is accelerating. According to the United Nations, the number of people aged 60 years and above is expected to double by 2050, reaching approximately 2.1 billion. This demographic shift could lead to a rise in demand for healthcare services.
Due to the increasing incidence of chronic illnesses, an aging population, and the surge in recurring and debilitating conditions, health concerns and care have become a focal point, driving substantial growth in the healthcare industry. The U.S. pharmaceutical market is expected to grow at a CAGR of 5.5% by 2030.
Given these favorable industry trends, let’s look at the fundamentals of the three Medical - Pharmaceuticals stocks that stand to benefit from an aging population, starting from the third choice.
Stock #3: Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. It operates through two segments: Innovative Medicine and MedTech.
On July 17, 2024, JNJ declared a cash dividend of $1.24 per share on the company’s common stock for the third quarter of 2024, payable on September 10, 2024.
The company pays $4.96 annually, which translates to a yield of 3.17% on the prevailing price level. Its four-year average dividend yield is 2.70%. The company has raised its dividend payouts at a CAGR of 5.6% and 5.7% over the past three and five years, respectively.
JNJ’s trailing-12-month EBIT margin of 27.98% is significantly higher than the industry average of 1.86%. Likewise, the stock’s trailing-12-month EBITDA and levered FCF margins of 35.98% and 28.37% are significantly higher than the industry averages of 6.05% and 1.16%, respectively.
JNJ’s sales to customers for the second quarter that ended June 30, 2024, stood at $22.45 billion, up 4.3% year-over-year. Its gross profit grew 3.5% over the prior-year quarter to $15.58 billion. In addition, its adjusted net earnings and adjusted EPS increased 1.6% and 10.2% from the year-ago quarter to $6.84 billion and $2.82, respectively.
Analysts predict JNJ’s revenue for the third quarter (ending September 2024) to increase 3.7% year-over-year to $22.14 billion, and its EPS for the quarter ending December 2024 is projected to grow 1.2% year-over-year to $2.32. Moreover, the company has an excellent earnings surprise history, surpassing consensus EPS estimates in each of the trailing four quarters.
Shares of JNJ have gained 5.2% over the past three months to close the last trading session at $156.28.
JNJ’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Quality and a B for Value and Stability. JNJ is ranked #9 among 154 stocks in the Medical - Pharmaceuticals industry.
Click here to access additional JNJ ratings (Momentum, Growth, and Sentiment).
Stock #2: AbbVie Inc. (ABBV)
ABBV discovers, develops, manufactures, and sells pharmaceuticals worldwide. The company offers Humira, Skyrizi, Rinvoq, Imbruvica, Epkinly, Elahere, and Venclexta/Venclyxto.
On June 4, 2024, ABBV announced that RINVOQ is indicated in the U.S. for treating pediatric patients aged two and older with active polyarticular juvenile idiopathic arthritis and psoriatic arthritis. RINVOQ LQ, a weight-based oral solution for pediatric patients, is also available.
ABBV’s trailing-12-month gross profit margin of 69.17% is 21.12% higher than the industry average of 57.11%. Likewise, its trailing-12-month EBIT margin and levered FCF margin of 32.11% and 43.40% are considerably higher than the industry averages of 1.86% and 1.16%, respectively.
ABBV’s net revenues for the fiscal first quarter that ended March 31, 2024, increased marginally year-over-year to $12.31 billion. Its operating earnings rose marginally over the prior-year quarter to $2.80 billion. In addition, its adjusted earnings after tax stood at $4.12 billion. Also, its adjusted EPS came in at $2.31.
Analysts expect ABBV’s revenue for the quarter ended June 30, 2024, to increase 1.2% year-over-year to $14.03 billion, and its EPS is expected to be $2.66 for the same quarter. The company surpassed the Street revenue estimates in each of the trailing four quarters, which is impressive.
Shares of ABBV have surged 23.1% over the past year to close the last trading session at $176.21.
ABBV’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
ABBV has a B grade for Growth, Value, Stability, and Quality. It is ranked #5 out of 154 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have ABBV ratings for Momentum and Sentiment. Get all ABBV ratings here.
Stock #1: Merck & Co., Inc. (MRK)
MRK is a global healthcare company. It operates in the Pharmaceutical and Animal Health segments. Its Pharmaceutical segment offers human health pharmaceutical products and the Animal Health segment discovers, develops, manufactures, and markets veterinary pharmaceuticals. It caters to drug wholesalers and retailers, hospitals, and government agencies.
On July 23, 2024, MRK declared a quarterly dividend of $0.77 per share of the company’s common stock for the fourth quarter of 2024, payment on October 7, 2024.
The company pays $3.08 annually, which translates to a yield of 2.45% on the prevailing price level. Its four-year average dividend yield is 2.90%.
On July 12, 2024, MRK, known as MSD outside of the United States and Canada, announced the completion of the acquisition of Eyebiotech Limited (EyeBio). EyeBio is now a wholly-owned subsidiary of MSD.
Dr. Dean Y. Li, president of Merck Research Laboratories, said, “The EyeBio acquisition further diversifies our late-stage pipeline with the addition of a promising candidate based on novel biology and genetics for the treatment of certain retinal diseases.”
MRK’s trailing-12-month gross profit margin of 74.85% is 31.1% higher than the 57.11% industry average. Its 34.54% trailing-12-month EBITDA margin is 471% higher than the 6.05% industry average. Likewise, the stock’s 15.62% trailing-12-month levered FCF margin is significantly higher than the 1.16% industry average.
For the first quarter that ended March 31, 2024, MRK’s sales increased 8.9% year-over-year to $15.77 billion, of which its sales from KEYTRUDA rose 19.9% year-over-year to $6.95 billion. The company’s income before taxes grew 55.3% from the year-ago value to $5.67 billion.
In addition, non-GAAP net income attributable to MRK and non-GAAP EPS of $5.28 billion and $2.07 indicate growth of 48.1% and 47.8% year-over-year, respectively.
Street expects MRK’s revenue for the second quarter ended June 2024 to increase 5.4% year-over-year to $15.84 billion. Its EPS is expected to be $2.14 for the same quarter. In addition, the company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.
MRK’s stock has gained 22.2% over the past nine months to close the last trading session at $125.92.
MRK’s POWR Ratings reflect its bright outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Sentiment, Value, Stability, and Quality. Within the same industry, MRK is ranked #2.
Click here to access additional ratings of MRK for Momentum.
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JNJ shares were trading at $159.51 per share on Thursday afternoon, up $3.23 (+2.07%). Year-to-date, JNJ has gained 3.37%, versus a 14.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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