3 Healthcare Stocks to Buy on the Dip

As multiple coronavirus variants continue to be identified and drug makers seek approval for treatments, the healthcare industry is enjoying the market’s attention. This is evident in the Health Care Select Sector SPDR Fund’s (XLV) 13.5% year-to-date returns. So, amid current market volatility, we think it could be wise to bet on quality healthcare stocks because the sector is defensive and could add stability to one’s portfolio. 

The prevalence of chronic diseases and an aging population are also expected to increase the need for healthcare solutions. According to a Techtic report, the global healthcare market is expected to reach $11.91 trillion by 2022.

So, we think it could be wise to bet on fundamentally sound healthcare stocks Stryker Corporation (SYK), Boston Scientific Corporation (BSX), and ResMed Inc. (RMD), which are trading below their 52-week highs now.

Click here to checkout our Healthcare Sector Report for 2021

Stryker Corporation (SYK)

Medical technology company SYK in Kalamazoo, Mich., operates through three segments: Orthopaedics; MedSurg; and Neurotechnology and Spine. The company sells its products to several healthcare facilities through company-owned subsidiaries & third-party dealers globally.

On September 7, SYK acquired Gauss Surgical, a medical device company, which developed Triton. Dylan Crotty, president of Stryker’s Instruments division, said, “Our belief is that Triton technology will help improve the industry standards for quantifying blood loss in the labor and delivery department, furthering Stryker’s commitment to improve safety and outcomes for our caregivers and their patients.”

SYK’s net sales increased 55.4% year-over-year to $4.29 billion in the second quarter, ended June 30, 2021. Its gross profit came in at $2.77 billion, up 79.1% year-over-year. Its net earnings were $592 million compared to an $83 million loss in the year-ago period. Also, its EPS was $1.55 compared to a $0.22 loss in the previous period.

Analysts expect SYK’s revenue and EPS to increase 20.4% and 25.3%, respectively, year-over-year to $17.27 billion and $9.31for its fiscal year 2021. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 11.9% in price to close yesterday’s trading session at $270.86. It is currently trading 3.7% below its 52-week high of $281.16, which it hit on September 9, 2021.

SYK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

SYK has a B grade for Growth and Stability. Within the Medical - Devices & Equipment industry, it is ranked #45 of 181 stocks. Click here to see the additional POWR Ratings for Value, Momentum, Sentiment, and Quality for SYK.

Boston Scientific Corporation (BSX)

BSX develops, manufactures, and markets medical devices for use in various interventional medical specialties worldwide. The Marlborough, Mass., company operates through three segments: MedSurg; Rhythm and Neuro; and Cardiovascular.

On October 6, BSX announced its agreement to acquire Baylis Medical Company Inc. Mike Mahoney, BSX’s Chairman and CEO, said, "We believe that Baylis Medical Company will add meaningful revenue, operating income, and new research and development capabilities across multiple Boston Scientific businesses, while complementing existing offerings within our electrophysiology and structural heart portfolios."

BSX’s net sales increased 53.6% year-over-year to $3.08 billion for its fiscal second quarter, ended June 30, 2021. The company’s operating income came in at $262 million, versus a $71 million loss in the prior year. Its gross profit in the quarter was $2.13 billion, up 75.9% from the year-ago period. Also, its EPS came in at $0.12 compared to a $0.11 loss per share in the prior year’s quarter.

For its fiscal year 2021, analysts expect BSX’s revenue to be $12 billion, representing a 21.1% year-over-year rise. The company’s EPS is expected to increase 67.7% year-over-year to $1.61 in fiscal 2021. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 21.7% in price to close yesterday’s trading session at $44.13. It is currently trading 4.7% below its 52-week high of $46.29, which it hit on August 2, 2021.

BSX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Growth.

Click here to see BSX’s ratings for Value, Momentum, Stability, Sentiment, and Quality as well. Again, BSX is ranked #33 in the Medical - Devices & Equipment industry.

ResMed Inc. (RMD)

RMD develops, manufactures, distributes, and markets medical devices and cloud-based software applications for the healthcare markets. The company operates in two segments, Sleep and Respiratory Care; and Software as a Service. RMD is headquartered in San Diego, Calif.

On August 16, RMD launched its AirSense 11 PAP Series, advancing digital health in sleep apnea treatment. Jim Hollingshead, the company’s president of Sleep and Respiratory Care segment, said “AirSense 11’s new tailored features along with our myAir patient engagement app help give people the support they need to use PAP—the gold standard for treating sleep apnea—comfortably and confidently every night.”

RMD’s revenue increased 13.7% year-over-year to $876.1 million in its fiscal fourth quarter, ended June 30, 2021. Its income from operations came in at $241.6 million, up 8.2% from the previous period. And its non-GAAP net income was $198.4 million, up 2.6% year-over-year. Also, its non-GAAP EPS came in at $1.35, up 1.5% year-over-year.

For its fiscal year 2022, RMD’s revenue and EPS are expected to grow 18.6% and 17.4%, respectively, year-over-year to $3.79 billion and $6.26. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 21.1% in price to close yesterday’s trading session at $260.16. It is currently trading 13.7% below its 52-week high of $301.34, which it hit on September 9, 2021.

RMD’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.

In addition, it has a B grade for Stability, Sentiment, and Quality. RMD is ranked #20 in the Medical - Devices & Equipment industry. Click here to see the additional POWR Ratings for RMD (Growth, Value, and Momentum).

Click here to checkout our Healthcare Sector Report for 2021

SYK shares were trading at $273.64 per share on Wednesday afternoon, up $2.78 (+1.03%). Year-to-date, SYK has gained 12.50%, versus a 22.05% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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