Healthcare Stocks Show Promise for 2025 Amid Mixed 2024 Performance

In 2024, the U.S. healthcare sector delivered a mixed performance. Healthcare stocks lagged behind the broader market as investors favored high-growth technology stocks, moving away from more defensive industries. This shift, however, has made healthcare stock valuations more appealing, creating potential opportunities for investors. With a 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, especially 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 rise, 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 fell amid concerns over potential policy changes from the new administration. Proposed cuts to government spending, decreased hospital funding, and expiring insurance subsidies have heightened uncertainty. Such developments could pressure margins, prompting companies to navigate a leaner funding landscape through innovative and efficient strategies.

Three Healthcare Stocks Analysts Recommend for Growth

As we head into 2025, three healthcare stocks stand out for their combination of solid 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 assessing company fundamentals in the current economic environment. Their recommendations assist investors in identifying stocks that could outperform. Based on these evaluations, the selected Medical stocks present promising opportunities for substantial 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. Research shows that such stocks often make for lucrative investment options. You can view 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: Located in Dallas, TX, Tenet Healthcare is a diversified healthcare services company. Increasing admissions and a favorable payer mix are enhancing the company’s hospital performance. It plans to allocate more capital to its high-acuity specialty service lines to promote organic growth. The company’s operations are strengthening through USPI’s performance and acquisitions.

Furthermore, Tenet aims to expand its Ambulatory Care business. It is also focused on divesting non-core and unprofitable units to reduce debt and ensure financial flexibility.

The Zacks Consensus Estimate for Tenet Healthcare’s current-year earnings is $11.37 per share, representing a 62.9% year-over-year increase. The company has experienced seven upward estimate revisions in the last 60 days, with none downward. THC has beaten the Zacks Consensus Estimate for earnings in each of the last four quarters, averaging a 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: Based in Birmingham, AL, Encompass Health provides post-acute healthcare services across the United States and Puerto Rico. The company is seeing a recovery in patient volumes and discharges, targeting a CAGR of 6-8% in discharges from 2023 to 2027. The aging population continues to drive demand for its services.

Focusing on its Inpatient Rehabilitation segment will likely enhance profitability. Over the 2023-2027 period, Encompass plans to open six to ten new locations each year and add 80-120 beds annually.

The Zacks Consensus Estimate for Encompass Health’s current-year earnings is $4.29 per share, indicating a 17.9% year-over-year growth. It has seen nine upward estimate revisions in the last 60 days, with none down. EHC has consistently surpassed the Zacks Consensus Estimate for earnings over the past four quarters, averaging a surprise of 13.6%.

Encompass Health Corporation Stock Price and EPS Surprise