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IChingon Mar 19, 2007 2:22pm
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US and health care industry outlook
US and health care industry outlookBULLS TAKE CHARGE OF U.S. HEALTH CARE STOCKS
U.S. health care equipment stocks represent one of BCA Research's “highest conviction overweight positions for 2007, and potentially beyond,” as it predicts that a long-term bull market is under way in the sector.
On average, the sector has outperformed the broader market by 79 per cent during four bull markets since 1984, with rallies lasting 35 months. BCA thinks a repeat is in order, owing to the sector's defensive profit profile and global revenue exposure.
Some well-known names in the group include Boston Scientific, Medtronic, Varian Medical, Biomet, St. Jude Medical, Stryker, and Zimmer.
BCA contends that demand is solid for health care equipment and profit margins are set to widen. Valuations may be more attractive than they appear because relative forward profit could rise markedly this year, it predicts.
On the subject of a brightening sales outlook, BCA points out that a massive divergence has opened between construction of health care facilities in the United States and both new orders and capital spending growth, “implying that significant pent-up demand [for equipment] is being created.”
And even if the rate of new construction eases, it figures revenue growth for equipment suppliers should climb for at least the balance of the year, compared with the overall corporate sector.
From GlobeInvestor online...