Archive

Drugmakers aid stock market rebound | TribLIVE.com
U.S./World

Drugmakers aid stock market rebound

The Associated Press

NEW YORK — For stocks, it’s just what the doctor ordered.

Health care companies are leading the market’s rebound from a sharp sell-off two weeks ago, helping push the Dow Jones industrial average and the Standard & Poor’s 500 index back to record levels.

The industry, which is made up of a range of companies, from global drugmakers such as Pfizer to insurers like UnitedHealth, has risen 11.2 percent since Oct. 15, when the stock market’s recent slump hit bottom. That is a bigger rise than the 8.4 percent gain for the broader market.

The surge has been driven by strong third-quarter earnings.

About two-thirds of companies in the S&P 500 have turned in results, and the health care industry is on track to have the best earnings growth, according to data from Estimize, a company that gathers forecasts from financial professionals.

Average earnings growth for the sector is forecast to come in at 14 percent for the period, higher than growth of 11.7 percent for all companies in the index. Sales are booming, with sector revenue expected to rise 12 percent for the quarter, above the 4.5 percent growth overall.

Celgene has been one of the best-performing health care stocks in the S&P 500 since the market slump ended Oct. 15. Shares of the biotechnology company have surged 24 percent since the bottom, helped by a strong earnings report last month that showed a double-digit increase in sales. The company is confident about its drugs in development.

Health care stocks, which also include medical device makers and hospital owners, have been an investor favorite for some time. The sector is up 21 percent in 2014, and is on track to outperform the broader market for the fourth straight year.

What’s driving the streak? Aging populations in the developed world mean more money spent on medicines and treatments.

Health care spending is forecast to grow at an average of 5.7 percent in the 10 years from 2013 to 2023, 1.1 percentage points faster than the overall growth rate for the economy, according to estimates from the Centers for Medicare and Medicaid Services. The United States spends close to 20 percent of its gross domestic product on health care, compared with 14 percent 20 years ago, according to World Bank figures.

Within the sector, some big drug companies are attractive to investors because they typically pay large dividend relative to the average S&P 500 company. Pfizer, the world’s second-biggest drugmaker, has a dividend yield of 3.4 percent, compared with a yield of 1.9 percent for the broader market. The yield is a measure of the dividend compared to a company’s stock price.

AbbVie, another drugmaker that pays a healthy dividend, surged Friday after reporting third-quarter earnings that were better than analysts forecast. The maker of Crohn’s disease treatment Humira also raised its earnings outlook for the second time this year.

The company, which said last month that it was walking away from its $55 billion takeover of Shire, has seen its stock price rise surge 16 percent since the end of the slump.


TribLIVE commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.