Tipping Point for Healthcare Stocks While Others Take a Hit – RMD, CSL, RHC, SHL, COH

Tipping Point for Healthcare Stocks While Others Take a Hit – RMD, CSL, RHC, SHL, COH

The coronavirus (2019-nCoV) outbreak led to a significant impact on the global markets ever since it was first detected in China towards the end of 2019.

Experts believe that developing a vaccine may take over a year, and there might be no immediate solution for the existing threat. Given the first death reported outside China in the Philippines, the threat to other countries has grown more severe than ever. Meanwhile, WHO declared the outbreak as a global emergency, with the announcement impacting the already struggling markets further.

Chinese stocks witnessed substantial declines on 03 February 2020 after the markets opened for the first time since 23 January 2020. SSE Composite Index of the Shanghai Stock Exchange was down 7.72% (as at 3:00 PM GMT), and Shenzhen Stock Exchange Composite Index was down 8.41% (as at 4:29 PM GMT).

The global outbreak hit the Australian markets as well with S&P/ASX 200 witnessing a decline of 1.36% on 03 February 2020.

During the period, when almost all the markets and sectors have taken a hit, healthcare sector seems to be one of those sectors that are performing reasonably well compared to the other sectors.

In the table below, we can see the performance of different sectors of the Australian market.

While the healthcare sector has seen a decline as well, it is still one of the best performing sectors in Australia. The sector was the second-best performing sector after utilities.

Healthcare Sector Stands Out Though Might Not Be Completely Immune

The healthcare sector demonstrated a strong performance in 2019 with a return of 52.41%. Also, the sector has delivered impressive performance in January 2020 with a return of 12.04% despite the detrimental effect of the coronavirus outbreak.

The sector has traditionally been defensive, and in situations when the markets are struggling, investors look for such stocks to limit or minimise their losses.

Also, with coronavirus looking like a pandemic, healthcare companies that develop vaccines or companies that build face masks are likely to get a substantial boost, as the demand for their products is expected to increase.

On 25 January 2020, the University of Queensland announced that the Coalition for Epidemic Preparedness Innovations (CEPI) had asked the university to develop a vaccine for the novel coronavirus. Meanwhile, CEPI would work with healthcare sector players including Inovio and Moderna to continue its research, and this might have a positive impact on the sector.

However, being a part of the market that has struggled over the past couple of weeks, the healthcare sector is not entirely immune to the risk of the virus. As seen during the trading hours on the ASX, the healthcare sector fell by 0.45% on 03 February 2020.

Let us look at five healthcare stocks listed on the ASX - RMD, CSL, RHC, SHL, and COH. Even though the stocks ended in red on 03 February 2020, they have performed consistently over the last six months with close to or more than double-digit growth. RMD and CSL have been the standout performers during this period with over 30% growth each.

ResMed Inc. (ASX:RMD)

A dual-listed company, ResMed is engaged in the manufacturing of medical devices for the treatment of sleep-related disorders and respiratory diseases.

The company released its second-quarter FY 2020 results on 30 January 2020. ResMed reported a strong quarter with double-digit growth in both revenues and non-GAAP operating profits.

Below are the key highlights for the three months ended 31 December 2019:

  • Revenue increased by 13% (y-oy) to reach $736.2 million.
  • GAAP gross margin was reported at 58.0% while non-GAAP gross margin stood at 59.7%.
  • Non-GAAP operating profit grew 21% y-o-y while net operating profit was up 26%.
  • GAAP and non-GAAP diluted EPS were $1.10 and $1.21, respectively.
  • The company declared a per-share dividend of $0.39 with 13 February 2020 as the record date and 19 March 2020 as the payout date.

ResMed’s stock price stood at $23.910 at the close on 03 February 2020, a decline of 4.551%. The company has a market capitalisation of $36.22 billion and ~1.45 billion outstanding shares. The stock delivered positive returns of 17.83% and 31.84% over the last three months and last six months, respectively.

CSL Limited (ASX:CSL)

CSL Limited is a biotechnology firm engaged in the development of medicines to treat various rare and severe diseases. The company is also involved in developing vaccines for influenza.

CSL’s stock price stood at $311.410 at the close on 03 February 2020, a decline of 0.205%. The company has a market capitalisation of $141.63 billion and ~453.88 million outstanding shares. The stock delivered positive returns of 21.88% and 35.90% over the last three months and six months, respectively.

Ramsay Health Care Limited (ASX:RHC)

Ramsay Health Care Limited is a provider of primary healthcare services through multiple primary care clinics and hospitals in 11 countries.

Ramsay’s stock price stood at $78.530 at the close on 03 February 2020, a decline of 0.846%. The company has a market capitalisation of $16.0 billion and ~202.08 million outstanding shares. The stock delivered positive returns of 15.64% and 8.82% over the last three months and six months, respectively.

Sonic Healthcare Limited (ASX:SHL)

Sonic Healthcare Limited is a provider of healthcare services including radiology/diagnostic imaging, pathology and primary care services. The company has operations in Australia, New Zealand, UK, Switzerland, Germany, Ireland, and Belgium.

Sonic’s stock price stood at $31.490 at the close on 03 February 2020, a decline of 0.568%. The company has a market capitalisation of $15.04 billion and ~475.05 million outstanding shares. The stock delivered positive returns of 10.97% and 12.95% over the last three months and six months, respectively.

Cochlear Limited (ASX:COH)

Cochlear Limited manufactures and provides implant devices and solutions to treat people with hearing loss. The company has a strong presence globally with sales in more than 100 countries and direct operations in around 30 geographies.

Cochlear’s stock price stood at $239.750 at the close on 03 February 2020, a decline of 0.548%. The company has a market capitalisation of $13.94 billion and ~57.83 million outstanding shares. The stock delivered positive returns of 13.96% and 9.40% over the last three months and six months, respectively.


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