Healthcare Sector Fundamentals Hint at 2025 Rebound Despite Industry Discontent
Recent unease in the healthcare sector has prompted nervous selling on Wall Street, but some analysts aren’t afraid to say the P word — profits. Buoyed by hopes of lower rates and a Trump presidency, favorable fundamentals and anticipated growth have some investors singling out the opportunity in the business, which is emerging as a top pick for 2025.
- According to FactSet, health care is “expected to see the largest price increase” among S&P 500 sectors, highlighting the gap between fundamental value and current prices.
- The Health Care Select Sector ($XLV) is trading at about 34x price-to-earnings, but with improving profits expected in 2025, analysts anticipate its forward P/E to drop to 20.5x.
What’s the prescription? FactSet credits the rapid shift in fundamentals to “easy comparisons” from last year’s weaker earnings. In Q4, the business analytics giant anticipates the industry’s earnings to bounce 12.1% year-over-year, led by a 64% YoY rise in pharmaceutical revenues — the best in the sector. Despite these bright spots, the has slipped 2% this week, weighed down by declines in private insurers like United Healthcare, Cigna, and CVS Health. Yet, analysts are keeping a close eye on the sector’s recovery potential, expecting fundamentals to strengthen as 2025 approaches.
