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.

Bottom Line
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.

Related Articles
  1. Stock Analysis

    Will J.C. Penney Come Back in 2016? (JCP)

    J.C. Penney is without a doubt turning itself around, but that doesn't guarantee the stock will respond immediately.
  2. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  3. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  4. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  5. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  6. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  7. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  8. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  9. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  10. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center