In general, healthcare-related stocks have been a great place for many investors to continue to make money during the brutal bear market. With increasing demand for many of the different healthcare-related services and promised reform of the healthcare system, which more than likely will bring increased government spending, countless investors are contemplating whether now is the time to go into healthcare-related stocks.
Swine Flu Outbreak Underscores Need For More Healthcare Spending
The recent swine flu outbreak underscores some of the many different vulnerabilities of the healthcare industry. If a pandemic were to occur, it is estimated that 10 million hospital beds would be needed to handle everyone affected by the illness. Currently the United States has 1 million hospital beds, and two-thirds of them are occupied. Clearly, demand for healthcare-related services is at high levels and is expected to increase by 6.7% per year until 2017, when healthcare is expected to contribute 19.5% of the GDP.
Ways To Profit From The Shortfall In Available Beds
You can make money in this promising sector in many ways. That being said, to have consistent long-term growth requires that you identify stocks with improving earnings. (For more, see Investing In The Healthcare Sector.)
LifePoint Hospitals (Nasdaq:LPNT) reported better than expected earnings of 74 cents per share compared to 69 cents during the same period one year ago. Commenting on the recent results, President/CEO William F. Carpenter said, "This strong first quarter gives us an excellent start for 2009. We are seeing successes from our investments in new services, physician recruitment and our traditional focus on fiscal discipline. This indicates we have the right strategy and the right people who will continue to execute in a difficult economic environment. We are pleased with our performance and look forward to building upon these results for the remainder of the year."
Community Health Systems (NYSE:CYH) reported improved earnings of 63 cents compared to 52 cents a year ago. The company also reaffirmed its previous guidance of $1.82 to $2.02 with President/CEO Wayne Smith saying, "We are pleased with our solid financial performance for the first quarter of 2009. These results reflect our proven operating strategy and our ability to drive revenues and improve the financial performance of our hospitals in spite of a challenging operating environment."
The improving year-over-year results from both healthcare providers and positive comments show that in spite of what is happening in the economy, their businesses remain strong, thanks in part to increasing demand. This demand should continue to help increase their overall earnings for the foreseeable future.
Elsewhere In The Healthcare Sector
Investors saw UnitedHealth Group (NYSE:UNH) report better than expected earnings of 81 cents per share versus 78 cents for the same period last year. UnitedHealth is also maintaining its 2009 earnings outlook of $2.90 to $3.15 per share. In addition, WellPoint (NYSE:WLP) reported earnings of $1.16 versus $1.07 a year ago. For the year, the company said it expects to see earnings of $5.14 to $5.20 per share. Commenting on recent earnings, President/CEO Angela Braly
said, "Our first quarter was solid in light of the current economy, and it is clear that the performance improvement initiatives we put into place last year are generating positive results. We are pleased that, despite the economy, our enrollment in the national business increased by more than 400,000, or 3.6 percent, during the quarter."
These two healthcare plan providers' results indicate they are seeing improving earnings as a result of increased demand for healthcare-related services.
The growth in healthcare demand is having an impact across the entire healthcare industry. This is translating into improving year-over-year earnings, guidance from the companies and positive comments from the CEOs regarding the current state of business. This is obvious when you see these results from two large hospitals and two large healthcare plan providers. While no one knows what the future will bring, it is clear that the growth in demand for services will continue to have a positive impact on earnings for companies across the entire healthcare sector.
For related reading, see Fighting The High Costs Of Healthcare and Measuring The Medicine Makers.