It's been tough sledding for healthcare stocks this year. The Healthcare Select Sector SPDR ETF (XLV 1.66%) has dropped by over 10.6% since December, and the ETF slipped slightly again this past week. The sell-off has taken a toll on most healthcare stocks. However, shares in these three healthcare stocks bucked the trend and traded higher. Here's why.
No. 1: WellCare Health Plans (WCG): up 17.1%
"We've made significant progress in 2015 in positioning the business, both operationally and financially, to build a strong foundation to support our long-term growth target of doubling our revenue between 2017 and 2021."
-- CEO Kenneth Burdick
After reporting its full-year financials for 2015 on Feb. 9 and offering up a bullish forecast that calls for a doubling in sales in the next five years and a big increase in margin, shares in WellCare Health Plans jumped significantly this week.
The company's strategy for top-line growth includes M&A activity and expanding its Medicaid footprint, and given last year's performance, it would seem the company is on the right track. Wellcare added 78,000 new Medicaid members to its business in 2015, and that helped it deliver $13.9 billion in premium revenue, up from $13 billion in 2014.
The company also reported that it's making headway on its goal of achieving adjusted net income margin north of 2% someday. In 2015, the measure improved to 1.1% from 0.7% in 2014. Assuming the company's cost initiatives and Medicaid bid strategy pans out, then investors would be right to assume that the company will be far more profitable in 2021 -- when sales may have doubled -- than it is today. That makes for a compelling argument to be long, given that the company's EPS already jumped to $2.69 last year from $1.45 in 2014.
No. 2: Juno Therapeutics (JUNO): up 12.16%
Following an investor presentation at the Leerink Partners global healthcare conference on Feb. 10, shares in cancer drug upstart Juno Therapeutics took off.
The company and its peers have been some of the hardest hit in the biotech sell-off because their research into chimeric antigen receptor T-cell therapies is in the early stages and is therefore risky. However, exiting the conference, investors appear encouraged that Juno Therapeutics can overcome potential safety risks tied to dangerous cytokine responses and deliver best-in-class outcomes in B-cell, and other cancers.
In the company's presentation, management highlighted 82% and greater response rates in small trials involving acute lymphoblastic leukemia and non-Hodgkin lymphoma patients and highlighted target market opportunities totaling in the billions of dollars annually.
Whether Juno Therapeutics ends up capturing any of that market remains to be seen. The company still needs to conduct larger trials before it can think about commercialization. However, given that biotech Goliath Celgene inked a $1 billion deal with Juno Therapeutics last summer, it seems investors aren't the only ones who are optimistic about the company's future.
No. 3: Owens & Minor (OMI 1.21%): up 11%
On Feb. 8, Owens & Minor updated investors on its progress, and while fourth-quarter revenue of $2.49 billion was a bit shy of industry watchers' forecasts, its EPS of $0.56 beat their outlook by $0.07, and that was good enough to spark a rally.
Last year, the medical products supplier grew its sales by 3.5% to $9.77 billion, and that growth (and tight purse strings) allowed it to generate a record $2 per share in earnings, up $0.24 from 2014.
Previously, Owens & Minor's international business had been a big headwind to its results, but the company appears to be making progress on changing that. International sales fell 14.6% last year because of planned business exits and currency conversion. However, ex-currency sales only slipped by 3.5%. Importantly, cost measures put in place last year led international operating income to swing positive to $3.9 million -- a $10.6 million improvement from 2014.
Given that its overseas business appears to be tracking better and the U.S. business saw its sales expand by a healthy 4.5% to $9.36 billion in 2015, it's not too surprising that investors are warming up to the company's stock.