Analysts Take Action on Health Care Stocks

Analysts are taking action on health care stocks.

Deutsche Bank has increased its rating on shares of Aetna Inc. (AET, Financial) to buy from a previous rating of hold. The stock has a recommendation rating of 2.4 out of 5 and a price target of $200.24 per share. The price target is a mean of a $170 to $214 per share range and represents a 5.8% increase from the current New York Stock Exchange valuation of $189.34 per share.

Some indicators on Aetna Inc.:

• The price-book (P/B) ratio is 3.97 versus an industry median of 2.89
• The price-sales (P/S) ratio is 1.04 versus an industry median of 0.58
• The EBITDA margin is 6.4% versus an industry median of 8.3%
• The price-earnings (P/E) ratio is 35.09 versus an industry median of 19.90
• The current dividend yield is 1.06% versus an industry median of 1.41% and versus a S&P 500 current dividend yield of 1.73%

The stock is far above the earnings lines with and without non-recurring items, according to the Peter Lynch chart:

The forward PE ratio is 18.62 while the industry has a ratio of 15.85.

Aetna has a forward dividend of $2 per share and a forward yield of 1.06%. The industry has a forward dividend yield of 1.53%.

The second stock of this mini-list is Eli Lilly and Company (LLY, Financial), which shares have been downgraded by Credit Suisse. The analyst has revised its rating downgrade to underperform from a previous neutral. Eli Lilly and Company has a 2.3 out of 5 recommendation rating and the average price target is $92.09 versus a current share price of $85.44.

Some indicators on Eli Lilly:

• The price-book (P/B) ratio is 6.32 versus an industry median of 2.86.
• The price-sales (P/S) ratio is 4.02 versus an industry median of 2.79.
• The EBITDA margin is 20.1% versus an industry median of 18.5%.
• The price-earnings (P/E) ratio is 40.49 versus an industry median of 25.41.
• The current dividend yield is 2.44% versus an industry median of 1.58% and versus a S&P 500 current dividend yield of 1.73%.

The stock is trading above the earnings lines with and without non-recurring items. You can see that from the Peter Lynch chart:

The forward PE ratio is 18.32 while the industry has a ratio of 19.53.

Eli Lilly and Company has a forward dividend of $2.25 per share and a forward yield of 2.63%. The industry has a forward dividend yield of 1.05%.

Abbott Laboratories (ABT, Financial) has also been downgraded from BTIG Research (buy to neutral) on a note published by the analyst.

Abbott Laboratories still has a buy recommendation with a rating of 2. The recommendation rating ranges between 1.0 (strong buy) and 5.0 (sell). The average analyst predicts a nearly 7% upside in the current market value of Abbott Labs to $63.67 within Jan. 2019. The mean is a result of $59 to $68 estimates on the stock’s price target. A total of 18 estimates fall in this range.

Some indicators on Abbott Labs:

• The price-book (P/B) ratio is 3.23 versus an industry median of 2.94.
• The price-sales (P/S) ratio is 3.99 versus an industry median of 3.06.
• The EBITDA margin is 23.3% versus an industry median of 19%.
• The price-earnings (P/E) ratio is 46.91 versus an industry median of 30.77.
• The current dividend yield is 1.80% versus an industry median of 1.38% and versus a S&P 500 current dividend yield of 1.73%.

Abbott Labs is also overvalued compared to the Peter Lynch earnings lines as illustrated by the chart powered by GuruFocus:

The forward PE ratio is 21.19 while the industry has a ratio of 25.06.

Abbott Labs has a forward dividend of $1.12 per share and a forward yield of 1.89%. The industry has a forward dividend yield of 1.40%.

For the 52 weeks ending on Monday, Abbott Labs and Aetna outperformed the S&P 500 index with 48% and 59% increases, while Eli Lilly and Company underperformed the benchmark over the same period with a 12% gain. The S&P 500 index grew 25%:

Source: Yahoo Finance

The most prominent top institutional holders of the three stocks include the Vanguard Group, Inc., which has 7.57% of Abbott Labs’ shares outstanding. Blackrock Inc. owns 8.89% of Aetna Inc. and Lilly Endowment Inc. owns 11.2% of Eli Lilly and Company.

(Disclosure: I don’t have any position in any security mentioned in this article.)