There are many theories about what is (and what is not) a good indicator of a stock’s future performance (up or down). As most financial columns note, past performance is not always a reliable indicator of what to expect in the future. The expression “what goes up must come down” dates to the 1870s (or, maybe, the 1820s).
So far in 2023, health care and health insurance stocks have been a mixed bag. GoodRx, the prescription drug discounter, has been on a bit of a roller-coaster ride this year. It’s taken a hit in response to a months-long dispute with Kroger Co. and had some highs in response to news of a possible new deal with CVS Caremark.
In spite of (or some would argue, because of) COVID-19, you might expect big pharmaceutical companies like Moderna, Pfizer, Johnson & Johnson, and AstraZeneca to all be going gangbusters. However, the group has experienced mixed results in 2023. Moderna reported second-quarter losses and plummeting sales in early August. Pfizer’s stock was lower in May, June, and July (as compared to March and April), but the company has recently earned approval on a new blood cancer drug.
J&J has seen its stock tumble this year – attributable in part to ongoing issues related to its talc lawsuits.
More positive news is that J&J has a long record of dividend payments. 2023 is its 61st year of annual payout increases, according to Motley Fool. AstraZeneca topped $75.00 in May and June but was around $69.00 in mid-August. It boasts on its website that it has 172 projects in different phases of development.
U.S. News said in a June 21 article that health stocks worth watching (or investing in) during 2023 (beyond Pfizer) include Eli Lilly, Merck, Abbott, Medtronic, HCA Healthcare, and a handful of others. The magazine’s recommendations were based on CFRA Research analysts.
Health Care and Insurance Stocks
Looking at insurance stocks, what are the ones to watch during the rest of 2023 and 2024? Here’s a look at seven, in alpha order.
Centene: Centene Corporation is a multi-state managed health care company offering individual, family, and employer-sponsored health insurance directly, through brokers, and through government-sponsored programs and private health insurance exchanges. It says it offers affordable and high-quality products to nearly one in 15 individuals across the country. Centene operates under multiple brands, including Ambetter, Centurion Health, Coordinated Care, Envolve, Health Net, Magellan, Trillium, and WellCare. Centene also markets Medicare Advantage and Medicare-Medicaid plans as well as specialty services, pharmacy benefit management, vision and dental insurance, and health care administrative and management services.
In the past year, Centene’s stock price has ranged from $61.34 to $96.12.
Cigna Group: Cigna is a health insurer doing business globally. It offers medical, dental, disability, life, and accident insurance, as well as related products and services. Domestically, most coverage is offered through employers, unions, associations, and governmental and non-governmental organizations. The company also offers Medicare and Medicaid products and health, life, and accident insurance to individuals in the U.S. and select international markets. It acquired the pharmacy benefit manager Express Scripts in 2018, rebranding it as Evernorth in 2020. The Cigna + Oscar joint venture for group health launched in California launched in 2020. Today it operates in Connecticut, Georgia, Kansas City and St. Louis, Missouri, and Tennessee.
During the past year, Cigna’s stock price has ranged from $240.50 in May 2023 to $340.11 in December 2022. Total revenue during the second quarter was $48.6 billion. Shareholder net income during the quarter was $1.5 billion, or $4.91 per share. Quarterly revenue growth, year over year, was 12%, up from 9.9% in Q2 2022. At TipRanks, Cigna is considered a Moderate Buy.
CVS Health: CVS is more than an insurance company. It’s a diversified health services company that includes more than 9,500 CVS Pharmacy locations (with nearly 12% offering CVS MinuteClinic® services), a pharmacy benefits manager (CVS Caremark), and Aetna, a health insurer tracing its history to the 1800s.
CVS is the largest pharmacy services provider in the U.S. (Walgreens is number two, with about nine percent fewer locations.) Aetna subsidiaries market health insurance, dental, vision, and other plans to individuals and employers. In addition, Aetna has affiliated businesses engaged in health management, benefits administration, and cost-management solutions for employers, health plans, and insurers. In 2023, CBS launched a unit, Cordavis, to market and co-produce biosimilar medicines.
CVS announced this summer a plan to cut 5,000 jobs as part of an ongoing effort to reduce expenses. Few reductions are expected at individual CVS stores, pharmacies, and clinics. Most impacted jobs are corporate roles. In all, the recently announced layoffs will eliminate less than 2% of the company’s workforce.
In August, Blue Cross of California announced plans to reduce its reliance on CVS Health’s Caremark PBM. Instead, the California health plan with nearly five million members will divide its pharmacy business among five different vendors: Amazon Pharmacy, Abarca, Caremark, Mark Cuban Cost Plus Drug Company, and Prime Therapeutics.
The year has been a challenge for CVS Health. While revenue is up 10%+, year over year, net income is down more than one-third ($1.90 billion, -37.24%). The company’s net profit margin was 43.09% lower year over year, and earnings are off about eight percent. In the past year, the stock price has ranged from a low of $64.62 to a high of $104.83. Based on the ratings of 15 Wall Street analysts, CVS Health Corp is a Strong Buy according to Tip Ranks.
Elevance Health (formerly known as Anthem, Inc.) is the parent of the largest for-profit managed health care company in the Blue Cross Blue Shield Association. It operates Anthem Blue Cross in California and Anthem Blue Cross Blue Shield in Nevada as well as Blue Cross and Blue Shield plans in 13 other states, although it is licensed to sell health insurance across the country. It markets individual and family insurance as well as employer-sponsored plans, Medicare Advantage plans, Medicare Supplements, and Medicaid plans. Its affiliated businesses include CarelonRx, a pharmacy benefits manager; Amerigroup, a health insurance and managed care provider (which is rebranding in 2024 as Wellpoint); Anthem Life Insurance Group, which offers life, annuity, and accident products; and New York health insurer Empire BlueCross BlueShield (which is rebranding as Anthem in 2024).
During the past year, Elevance Health’s stock has ranged from $412.00 (in July 2023) to $549.52 (in October 2022). According to CNN Business in August 2023, 19 analysts offering 12-month forecasts for Elevance Health have a median target of $572.00 with a high estimate of $629.00 and a low estimate of $493.00. Based on the price as of 08/17, the median estimate represents a near 25% increase. The consensus among polled analysts, as reported by CNN, is a Buy. It’s a Strong Buy at TipRanks.
Humana: Kentucky-based Humana, a Medicare Advantage, group health and ancillary benefits, and Medicaid leader, has grown revenue significantly in the past several years. In 2023, Q2 earnings per share (EPS) were $7.66 on a GAAP basis. Adjusted EPS was $8.94. Through mid-year, 2023 EPS was $17.54 on a GAAP basis and $18.32 on an Adjusted basis. Medicare Advantage membership is up 18% over year-end fiscal year 2022. In February, Humana announced an exit from the employer group commercial market. That includes fully insured, self-funded, and federal employee health benefit medical plans as well as related wellness and rewards programs. That exit is expected to be completed in 2024. In August, Humana and Interwell Health, a kidney management company, announced a new value-based care arrangement for Medicare Advantage HMO and PPO members in 13 states.
Humana’s 52-week low stock price is $423.29; it’s 52-week high is $571.30.
MarketBeat reported an August consensus recommendation of “Moderate Buy” for Humana.
MetLife: Known formally as Metropolitan Life Insurance Company, MetLife is among the country’s top insurers and the third largest U.S. life insurance company. (Its Metropolitan Group ranks behind Northwestern Mutual Group and New York Life Group.) Beyond its Life business, it is also a retirement solutions leader and a player among supplemental employee benefits products, offering hospital indemnity, dental, life, vision, legal services, and pet insurance. Outside the U.S., Asia, Europe, Japan, and Latin America are large markets for MetLife.
The past year has been a bit of a roller coaster for MetLife. The 52-week low of $48.95 occurred May 16 (when the stock was down 19.2%). The 52-week high, $77.36, occurred November 25. Among analysts, the stock is a Strong Buy according to TipRanks. MarketBeat.com says the consensus rating is a Moderate Buy.
UnitedHealth: UnitedHealth Group, Inc. is a multi-line insurer that offers coverage through a variety of business units, including UnitedHealthcare. It ranks as the largest health insurer in the world, marketing individual health insurance plans as well as employer-sponsored/group medical coverage, vision and dental insurance, Medicare Advantage and Medicare Supplemental Insurance, prescription drug plans, Medicaid plans, and a home health services provider, LHC Group, acquired in 2023. Also part of UnitedHealth are its Optum subsidiary businesses OptumHealth, OptumInsight, and OptumRx.
UnitedHealth has a history of healthy margins and annual dividends. In the second quarter of 2023, the company grew its revenue by 16%, year over year. Earnings from Operations grew 13% and earnings per share were $5.82, adjusted to $6.14 per share.
The company noted in July 2023 that based on its performance during the first half of 2023, as well as durable growth and operating expectations, it strengthened its full year net earnings outlook at $23.45 to $23.75 per share, with adjusted net earnings of $24.70 to $25.00 per share. The 52-week high through August 23 was $558.10 (on October 31, 2022) and the 52-week low was $445.68. The stock closed on August 23 at $489.44, down .59% for the day and $2.90. On the same day, Humana, Elevance Health, and CVS Health Corp also closed down less than 1% for the day. Cigna Group closed up .63% on the day to $281.83.
Even if you are not looking to invest in these stocks, it’s interesting to note how some of the industry’s major players are doing as the country continues to bounce back from the challenges related to the recent global pandemic. No one can predict with any certainty how these organizations might perform in 2024. Health care has many players – drug manufacturers, medical device firms, payers, and providers.
NOTE: This article is not intended to provide investment counsel or any other professional guidance. All investments have a potential for loss. This post is informational only, and there is no guarantee as to the accuracy, timeliness, or relevance of this information. All information is subject to change or interpretation.
