Wall Street Favorites: 3 Healthcare Stocks With Strong Buy Ratings for April 2024

Stocks to buy

Healthcare’s impact on the economy cannot be overstated. According to the American Medical Association, the U.S. spends more than $4 trillion a year on healthcare, which works out to nearly $13,000 per person. That makes America one of the top spenders on per capita healthcare in the world. And healthcare spending shows no signs of slowing down with the population aging and the Baby Boom generation now firmly among the ranks of senior citizens.

The stock market is full of healthcare securities. From pharmaceutical companies and insurers to medical device manufacturers and biotechnology start-ups, the healthcare field is large and diverse, and it presents opportunities to investors. The key is to know where to look. Some healthcare stocks are better investments than others, and analysts reserve their top ratings for only a handful of the very best companies.

Here is Wall Street favorites: three healthcare stocks with strong buy ratings for April 2024.

Danaher (DHR)

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Medical device manufacturer Danaher (NYSE:DHR) currently has a “strong buy” rating, with 13 Wall Street analysts recommending the stock. The strong rating comes after a sizable downturn in DHR stock over the past year. Between August and October last year, Danaher stock fell 21% and hit a multi-year low. Since Halloween, the company’s share price has rebounded and risen 32%. It is now approaching a 52-week high. The decline had been due to efforts by Danaher to separate its water testing and treatment business.

The separation is now completed and the water treatment and environmental science business has been successfully spun-off into a new publicly traded company called Veralto (NYSE:VLTO). The division has seen DHR stock recover as the company is now free to concentrate on its more lucrative medical device and supply business, leading to the strong buy rating from analysts. However, Danaher’s stock is only up 5% on the year and there appears to be more room for the share price to run.

UnitedHealth Group (UNH)

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Another healthcare stock that has struggled but that analysts rate as a “strong buy” is UnitedHealth Group (NYSE:UNH). The company’s share price has been knocked lower this year, falling 17% since January. The downturn has been mostly due to a higher medical loss ratio, though the company has also been hit by a cyberattack. This is concerning because it signals that the company is spending more on medical expenses, leaving less room for profits. This fact has been reflected in UnitedHealth’s recent earnings prints, which have disappointed.

The high medical loss ratio has been caused by a higher-than-expected utilization of medical services by patients enrolled in Medicare Advantage plans. This has become an issue not only for UnitedHealth but for most of the major American health insurers. Most recently, UnitedHealth reported a medical loss ratio for Q4 2023 of 85%. That was higher than a medical loss ratio of 84% expected on Wall Street. Despite the problem, analysts clearly see better days ahead for UNH stock.

Eli Lilly & Co. (LLY)

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Pharmaceutical company Eli Lilly & Co. (NYSE:LLY) has enjoyed a huge rally over the last year driven by demand and sales of the company’s blockbuster weight loss medication Zepbound. Analysts see more gains ahead and currently rate LLY stock a “strong buy.” The company’s new weight loss drug “Zepbound” only received regulatory approval from the U.S. Food and Drug Administration last fall. But already its sales are having a positive impact on Eli Lilly’s earnings.

The pharmaceutical giant reported fourth-quarter 2024 financial results that blew past Wall Street estimates, announcing earnings per share (EPS) of $2.49, which was well ahead of the $2.22 that had been expected. Revenue of $9.35 billion was also ahead of $8.93 billion that was forecast on Wall Street. Sales were up 28% from a year ago. The Q4 2023 results were the first to include sales of Zepbound, which some analysts say could post more than $1 billion in sales in its first full year on the market.

LLY stock has gained 109% over the past year, including a nearly 30% gain in 2024. Through five years, the company’s share price has increased more than 500%.

On the date of publication, Joel Baglole held a long position in LLY. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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