analyst's handbook: health care - ptmbook.yardeni.comptmbook.yardeni.com/pub/ahhc.pdf ·...

Analyst’s Handbook:Health Care

Yardeni Research, Inc.

September 25, 2017

Dr. Edward Yardeni516-972-7683

[email protected]

Mali Quintana480-664-1333

[email protected]

Please visit our sites atwww.yardeni.comblog.yardeni.com

thinking outside the box

Table Of Contents Table Of ContentsTable Of Contents

September 25, 2017 / Analyst’s Handbook: Health Care www.yardeni.com


S&P 500 Health Care 1Earnings 2Revenues & Margins 3Earnings Growth & Valuation 4S&P 500: Health Care 5S&P 500: Health Care (cont) 6S&P 500/400/600 Health Care YTD 7-8Health Care 9-16

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201875

275

475

675

875

1075

75

275

475

675

875

1075

9/25

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200-day moving average.* Ratio scale.

Source: Standard & Poor’s and Haver Analytics.

S&P 500 HEALTH CARE STOCK PRICE INDEX*

Figure 1.

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20.1

.2

.3

.4

.5

.1

.2

.3

.4

.5

S&P 500 HEALTH CARE(as a ratio of S&P 500)

9/22

Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Monthly through December 1990, then weekly. Monthlydata an average of Hospital Management, Medical Products, and Pharmaceutical industry ratios.Source: Standard & Poor’s Corporation.

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Figure 2.

S&P 500 Health Care

Page 1 / September 25, 2017 / Analyst’s Handbook: Health Care www.yardeni.com


1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20185

20

35

50

65

80

5

20

35

50

65

80

1718

9/14

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* Time-weighted average of consensus estimates for current year and next year. Monthly through December 2005, then weekly.Source: Thomson Reuters I/B/E/S.

S&P 500 HEALTH CARE OPERATING EARNINGS PER SHARE(analysts’ average forecasts, ratio scale)

Consensus ForecastsAnnual estimates

Forward earnings*

Figure 3.

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018-20

-15

-10

-5

0

5

10

15

20

-20

-15

-10

-5

0

5

10

15

20

NERI Jul 10.4 Aug 10.7 Sep 9.2

Sep

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* Three-month moving average of the number of forward earnings estimates up less number of estimates down, expressed as a percentageof the total number of forward earnings estimates.Source: Thomson Reuters I/B/E/S.

S&P 500 HEALTH CARE NET EARNINGS REVISIONS*

Figure 4.

Earnings



2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018150

225

300

375

450

525

600

150

225

300

375

450

525

600

1718

9/14

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* Time-weighted average of consensus estimates for current year and next year. Monthly through December 2005, then weekly.Source: Thomson Reuters I/B/E/S.

S&P 500 HEALTH CARE REVENUES PER SHARE(analysts’ average forecasts, ratio scale)


Forward revenues*

Figure 5.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20189.5

10.0

10.5

11.0

11.5

12.0

12.5

9.5

10.0

10.5

11.0

11.5

12.0

12.5

17 18

9/14

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(using analysts’ average earnings and revenues forecasts)

* Time-weighted average of the consensus estimates for current year and next year. Monthly through December 2005, weekly thereafter.Source: Thomson Reuters I/B/E/S.

S&P 500 HEALTH CARE PROJECTED PROFIT MARGIN


Forward profit margin* (10.7)

Figure 6.

Revenues & Margins



1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20180

5

10

15

20

0

5

10

15

20

9/14

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* STEG: 12- month (52-week) forward consensus expected earnings growth. LTEG: 5-year forward consensus expected earnings growth. Monthly datathrough 2005, then weekly.Source: Thomson Reuters I/B/E/S.

S&P 500 HEALTH CARE LTEG VS STEG(percent)

LTEG* (10.2)

STEG* (7.9)

Figure 7.

5

10

15

20

25

30

35

5

10

15

20

25

30

35

9/14

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018.50

.75

1.00

1.25

1.50

1.75

2.00

.50

.75

1.00

1.25

1.50

1.75

2.00

9/14

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* Price divided by 12-month forward consensus expected operating earnings per share.** Sector or industry forward P/E relative to S&P 500 forward P/E.

*** Sector or industry forward P/E relative to sector or industry consensus 5-year LTEG forecast.Source: Thomson Reuters I/B/E/S.

S&P 500 HEALTH CARE VALUATION

Forward P/E* (16.8)

Relative P/E** (0.9)

PEG Ratio*** (1.7)

Figure 8.

Earnings Growth & Valuation



Figure 9.

06 07 08 09 10 11 12 13 14 15 16 17 18 19200

300

400

500

600

700

800

900

1000

9/25S&P 500 HEALTH CARE

06 07 08 09 10 11 12 13 14 15 16 17 18 19250

350

450

550

650

750

850

950

1050

1150

1250

9/25S&P 500 HEALTH CARE EQUIPMENT(ABT BAX BCR BDX BSX EW HOLX ISRGMDT STJ SYK VAR ZMH)

06 07 08 09 10 11 12 13 14 15 16 17 18 19200

600

1000

1400

1800

2200

2600

3000

3400

3800

4200

4600

9/25S&P 500 BIOTECHNOLOGY(ABBV ALXN AMGN BIIB CELGGILD REGN VRTX)

06 07 08 09 10 11 12 13 14 15 16 17 18 190

50

100

150

200

250

300

350

400

450

500

550

600

9/25

S&P 500 HEALTH CARE FACILITIES(HCA UHS)

06 07 08 09 10 11 12 13 14 15 16 17 18 19100

200

300

400

500

600

700

800

900

1000

9/25

S&P 500 HEALTH CARE DISTRIBUTORS(ABC CAH HSIC MCK PDCO)

200-day moving average

Source: Standard & Poor’s Corporation.

06 07 08 09 10 11 12 13 14 15 16 17 18 1980

140

200

260

320

380

440

500

560

620

680

740

800

860

9/25

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S&P 500 HEALTH CARE SERVICES(DGX DVA ESRX LH)

S&P 500: Health Care



Figure 10.

06 07 08 09 10 11 12 13 14 15 16 17 18 19100200300400500600700800900

100011001200130014001500160017001800

9/25S&P 500 MANAGED HEALTH CARE(AET ANTM CI CNC HUM UNH)

06 07 08 09 10 11 12 13 14 15 16 17 18 1930507090110130150170190210230250270290310330350370

9/25

S&P 500 HEALTH CARE TECHNOLOGY(CERN)

06 07 08 09 10 11 12 13 14 15 16 17 18 19200

300

400

500

600

700

9/25

S&P 500 PHARMACEUTICALS(AGN BMY ENDP JNJ LLY MNK MRKMYL PFE PRGO ZTS)

200-day moving averageSource: Standard and Poor’s Corporation.

06 07 08 09 10 11 12 13 14 15 16 17 18 197090110130150170190210230250270290310330350370390410430450470

9/25S&P 500 LIFE SCIENCES TOOLS & SERVICES(A ILMN PKI TMO WAT)

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S&P 500: Health Care (cont)



Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2017

-20

-10

0

10

20

30

40

11.5

Figure 11.S&P 500 LargeCap

All Sectors


-15

-5

5

15

25

35

45

6.7

S&P 400 MidCap


-15

-5

5

15

25

35

45

4.7

S&P 600 SmallCap


-20

0

20

40

60

18.2Health CareSector


-20

0

20

40

60

18.1


-20

0

20

40

60

22.6


-50

-10

30

70

110

26.6Biotechnology


-50

-10

30

70

110

8.3


-50

-10

30

70

110

22.9


-40

-20

0

20

40

60

80

2.9

Health CareDistributors


-40

-20

0

20

40

60

80

-19.0


-40

-20

0

20

40

60

80

-13.9


-25

-5

15

35

55

22.9Health CareEquipment


-25

-5

15

35

55

27.0


-25

-5

15

35

55

24.5


-50

-30

-10

10

30

50

70

2.5Health CareFacilities


-50

-30

-10

10

30

50

70

18.8


-50

-30

-10

10

30

50

70

11.1


-40

-20

0

20

40

60

-5.5

Health CareServices

HC Supplies

Health CareTechnology


-40

-20

0

20

40

60

-35.8Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2017

-40

-20

0

20

40

60

27.9


-15-55

1525354555

21.0


-40-20

020406080

100

31.2


-30

-10

10

30

50

70

90

39.1Life SciencesTools & Services



-30

-10

10

30

50

70

90

27.3


-30

-10

10

30

50

70

90

3.1

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S&P 500/400/600 Health Care YTD




-40

-20

0

20

40

60

80

23.7

Figure 12.S&P 500 LargeCap

ManagedHealth Care


-40

-20

0

20

40

60

80

19.6

S&P 400 MidCap


-40

-20

0

20

40

60

80

13.6

S&P 600 SmallCap


-30-101030507090

110

10.3

Pharmaceuticals



-50-30-101030507090

110

10.1


-30-101030507090

110130

21.5

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S&P 500/400/600 Health Care YTD



90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 180

500

1000

1500

2000

2500

0

500

1000

1500

2000

2500

9/25

S&P HEALTH CARE

S&P 500 (942)S&P 400 (1544)S&P 600 (2148)


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Figure 13.

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 180

1000

2000

3000

4000

5000

0

1000

2000

3000

4000

5000

9/25

S&P HEALTH CARE BIOTECHNOLOGY

S&P 500 (4230)S&P 400 (3077)S&P 600 (1893)


yard

eni.

com

Figure 14.

Health Care



90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 180

200

400

600

800

1000

1200

0

200

400

600

800

1000

1200

9/25

S&P HEALTH CARE DISTRIBUTORS

S&P 500 (621)S&P 400 (688)S&P 600 (656)


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Figure 15.

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 180

1000

2000

3000

4000

5000

0

1000

2000

3000

4000

5000

9/25

S&P HEALTH CARE EQUIPMENT

S&P 500 (1185)S&P 400 (1737)S&P 600 (4590)


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Figure 16.

Health Care



04 05 06 07 08 09 10 11 12 13 14 15 16 170

200

400

600

800

0

200

400

600

800

9/25

S&P HEALTH CARE SERVICES

S&P 500 (619)S&P 400 (306)S&P 600 (594)


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Figure 17.

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 180

1000

2000

3000

4000

0

1000

2000

3000

4000

9/25

S&P MANANGED HEALTH CARE

S&P 500 (1677)S&P 400 (638)S&P 600 (3231)


yard

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com

Figure 18.

Health Care



90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 180

2000

4000

6000

8000

10000

0

2000

4000

6000

8000

10000

9/25

S&P HEALTH CARE PHARMACEUTICALS

S&P 500 (637)S&P 400 (1639)S&P 600 (7656)


yard

eni.

com

Figure 19.

Health Care



95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-50

0

50

100

-50

0

50

100

9/20

S&P HEALTH CARE(yearly percent change)

S&P 500 (13)S&P 400 (17)S&P 600 (17)


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Figure 20.

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-100

0

100

200

300

400

-100

0

100

200

300

400

9/20

S&P HEALTH CARE BIOTECHNOLOGY(yearly percent change)

S&P 500 (17)S&P 400 (25)S&P 600 (24)


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Figure 21.

Health Care



95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-100

-50

0

50

100

150

-100

-50

0

50

100

150

9/20

S&P HEALTH CARE DISTRIBUTORS(yearly percent change)

S&P 500 (-9)

S&P 400 (-15)

S&P 600 (-12)


yardeni.com

Figure 22.

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-50

0

50

100

150

-50

0

50

100

150

9/20

S&P HEALTH CARE EQUIPMENT(yearly percent change)

S&P 500 (13)S&P 400 (20)S&P 600 (27)


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Figure 23.

Health Care



2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-50

0

50

100

-50

0

50

100

9/20

S&P HEALTH CARE SERVICES(yearly percent change)

S&P 500 (-5)S&P 400 (-35)S&P 600 (19)


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Figure 24.

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17-100

0

100

200

-100

0

100

200

9/20

S&P MANANGED HEALTH CARE(yearly percent change)

S&P 500 (38)S&P 400 (32)S&P 600 (42)


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Figure 25.

Health Care



95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17-100

0

100

200

300

-100

0

100

200

300

9/20

S&P HEALTH CARE PHARMACEUTICALS(yearly percent change)

S&P 500 (6)S&P 400 (6)S&P 600 (-11)


yard

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Figure 26.

Health Care



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