With Medicare cuts, health-care stocks like Sun Healthcare Group, and National Healthcare Corp have tanked.But, healthcare companies have been seeing their most attractive, valuations in about 15 years, according to JPMorgan.
On the back of Merck’s earnings Friday, we’ve pulled four healthcare stocks you should watch.
Merck & Co.:
- On Friday Merck, posted Q2 earnings of $2.02 billion, or $0.65 per share. It also announced that it planned to slash about 1,000 jobs by late 2015 to save $1.5 billion annually. The company cut 12,500 jobs in 2010 and hired 6,000 new employees.
- Barclays analysts are cautious. In May, the FDA approved Merck’s Hepatitis C drug, Victrelis, but Vertex Pharmaceuticals Inc’s new hepatitis C drug is competing with Victrelis, and outpacing it 3-to-1. Merck has also stopped work on its phase-III experimental drug Telcagepant, that was being developed to treat acute migraines.
- Pending regulatory decisions could however act as a catalyst for the company which has maintained that it will maintain its research and development spending at stable levels.
- Morgan Stanley analyst David Risinger reduced his 2011 earnings expectations by 2%, and 2012 EPS expectations by 0.5%, on account of higher tax rate. Merck raised its 2011 tax rate guidance from 20% – 22% to 23% – 24%.
- Deustche Bank analysts are more positive on the stock, with its growth in Asian markets, financial flexibility and drugs in the pipeline.
- Citi analyst Yaron Werber has upgraded Vertex Pharmaceutical to ‘buy’. The stock has seen a pullback on fears that its new hepatitis C drug will disappoint. But Werber argues that the company posted strong Q2 results, and Incivek’s sales are unlikely to disappoint. Meanwhile the drug is expected to launch in Europe in early Q4.
- The company is filing an application in October, seeking U.S. approval for its experimental cystic fibrosis drug, VX-770, and Werber expects the drug to have a solid launch.
Magellan Health Services:
- Magellan Health Services posted better than expected earnings this quarter pushed by stronger buybacks. Moreover the company has shown results above initial guidance for six consecutive years, according to Barclays analysts.
- Deutsche Bank analysts are bullish on Magellan Health since it highlighted new business opportunities and announced new sales. Analysts boosted 2011 – 2013 EPS.
- LifePoint posted earnings of $0.77 per share ahead of Barclay’s estimates, and raised guidance to $2.95 – $3.15, up from $2.80 – $3.10. LPNT’s same-store inpatient admissions went up 0.9%, for the first time since Q1 2008.
- Meanwhile UBS analysts updated their estimates on strong earnings figures posted by LifePoint. Of note, LifePoint has got aggressive about M&As, it has acquired an outpatient cardiology business, and hospitals under the Duke LifePoint Healthcare partnership. And its expected to announce another in the near future.