In 2024, the U.S. healthcare sector delivered a mixed performance. Healthcare stocks lagged behind the broader market as investors leaned toward high-growth technology stocks, moving away from more defensive industries. This shift, however, has made healthcare stocks valuations more appealing, creating potential opportunities for investors. With growing demand for healthcare services, the sector’s prospects for 2025 appear promising.
Certain areas within the healthcare industry are showing resilience. Employment in the sector grew notably, particularly in the first quarter, reflecting strong demand. Despite these positive trends, the industry faced persistent challenges. Rising supply costs and higher labor expenses strained profit margins. Yet, the long-term outlook remains favorable, with profits expected to increase, supported by strategies like margin optimization, cost control and the integration of advanced technologies such as artificial intelligence, automation and machine learning.
Towards the year’s end, healthcare stock prices declined amid concerns over potential policy changes from the new administration. These include proposals to cut government spending, reduce hospital funding and expire insurance subsidies, all of which have heightened uncertainty. Such developments could pressure margins, urging companies to navigate a leaner funding landscape with innovative and efficient approaches.
3 Healthcare Stocks Analysts Are Bullish About
As we head into 2025, three healthcare stocks stand out for their blend of robust operations, stability and growth potential: Tenet Healthcare Corporation THC, Encompass Health Corporation EHC and The Ensign Group, Inc. ENSG. These companies come highly recommended by analysts and are well-positioned to deliver strong returns in a dynamic healthcare landscape.
Analysts provide valuable insights by evaluating company fundamentals against the current economic environment. Their recommendations help investors identify stocks with the potential to outperform. Based on these insights, the selected Medical stocks offer promising opportunities for robust returns.
These three picks were identified using the Zacks Stock Screener. Each company boasts a Zacks Rank #2 (Buy), a VGM Score of A, and a market capitalization exceeding $1 billion. Additionally, more than 70% of brokers rate them as a strong buy or buy. Our research shows that such stocks are often lucrative investment options. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stock Price Performance – THC, EHC, ENSG, S&P 500 & Sector
Image Source: Zacks Investment Research
Tenet Healthcare: Headquartered in Dallas, TX, Tenet Healthcare is a diversified healthcare services company. Rising admissions and a favorable payer mix are boosting the company’s hospital performance. It plans to continue allocating more capital to its high-acuity specialty service line to drive organic growth. Its operations are steadily gaining from USPI's performance, continuous buyout of the SCD Centers, buy-ups in multiple surgical hospitals and tuck-in acquisitions.
We expect more service line expansions in the Ambulatory Care business going ahead. THC also doesn’t shy away from divesting non-core and unprofitable businesses to repay debt and maintain financial liquidity.
The Zacks Consensus Estimate for Tenet Healthcare’s current-year earnings is pegged at $11.37 per share, indicating a 62.9% year-over-year jump. It has witnessed seven upward estimate revisions in the past 60 days against none in the opposite direction. THC beat the Zacks Consensus Estimate for earnings in each of the last four quarters, with an average surprise of 59.9%.
Tenet Healthcare Corporation Stock Price and EPS Surprise
Tenet Healthcare Corporation price-eps-surprise | Tenet Healthcare Corporation Quote
Last Closing Price: $129.71
52-Wk Low / High: $73.21 - $171.20
Wall Street Average Price Target: $180.84
Upside to Wall Street Average Price Target: 39.42%
Average Broker Recommendation: 1.42
Market Cap: $12.34B
Encompass Health: Birmingham, AL-based Encompass Health offers post-acute healthcare services in the United States and Puerto Rico. It is witnessing a revival in patient volumes and discharges and targets to bring about a CAGR of 6-8% in discharges in the 2023-2027 time frame. Growing utilization and bed additions will continue supporting its revenues. An aging population should continue to boost demand for the company’s services.
Encompass Health’s focus on growing its Inpatient Rehabilitation segment will likely boost its profitability. Over the 2023-2027 period, it plans to inaugurate six to 10 de novos each year, as well as make bed additions in the range of 80-120 each year.
The Zacks Consensus Estimate for Encompass Health’s current-year earnings is pegged at $4.29 per share, signaling 17.9% year-over-year growth. It has witnessed nine upward estimate revisions in the past 60 days against none in the opposite direction. EHC beat the Zacks Consensus Estimate for earnings in each of the last four quarters, with an average surprise of 13.6%.
Encompass Health Corporation Stock Price and EPS Surprise
Encompass Health Corporation price-eps-surprise | Encompass Health Corporation Quote
Last Closing Price: $94.17
52-Wk Low / High: $65.99 - $104.55
Wall Street Average Price Target: $116.50
Upside to Wall Street Average Price Target: 23.71%
Average Broker Recommendation: 1.08
Ensign Group: Based in San Juan Capistrano, CA, Ensign Group offers skilled nursing, senior living and rehabilitative services. Improving occupancy and higher skilled mix days are benefiting the company. It has a strong track record of growth through strategic acquisitions, focusing on real estate and post-acute care operations. It acquires operations and transforms them into market leaders.
Ensign Group recently agreed to add its first operations in Alaska and Oregon. It also expanded its presence in California and Washington. It has a strong balance sheet with cash and cash equivalents of $532.1 million at third quarter-end and long-term debt-less current maturities of only $142.6 million. This enables it to make shareholder value boosting efforts through dividend payouts.
The Zacks Consensus Estimate for Ensign Group’s current-year earnings is pegged at $5.49 per share, signaling 15.1% year-over-year growth. It has witnessed three upward estimate revisions in the past 60 days against none in the opposite direction. ENSG beat the Zacks Consensus Estimate for earnings in each of the last four quarters, with an average surprise of 1.3%.
The Ensign Group, Inc. Stock Price and EPS Surprise
The Ensign Group, Inc. price-eps-surprise | The Ensign Group, Inc. Quote
Last Closing Price: $134.72
52-Wk Low / High: $110.71 - $158.45
Wall Street Average Price Target: $164.33
Upside to Wall Street Average Price Target: 21.98%
Average Broker Recommendation: 1.50
Zacks Naming Top 10 Stocks for 2025
Want to be tipped off early to our 10 top picks for the entirety of 2025?
History suggests their performance could be sensational.
From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.
Tenet Healthcare Corporation (THC) : Free Stock Analysis Report
The Ensign Group, Inc. (ENSG) : Free Stock Analysis Report
Encompass Health Corporation (EHC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
