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Analyst’s Handbook:Health Care
Yardeni Research, Inc.
October 22, 2012
Dr. Edward Yardeni516-972-7683
Mali Quintana480-664-1333
Please visit our sites atwww.yardeni.comblog.yardeni.com
thinking outside the box
Table Of Contents Table Of ContentsTable Of Contents
October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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S&P 500 Health Care 1S&P 500 Health Care (cont) 2S&P 400: Health Care 3S&P 400 Health Care (cont) 4Health Care: S&P Sector and Cap, Year-to-Date 5-6Health Care Sector 7-8Relative Earnings & P/E: Health Care 9-10Profit Margin 11Earnings Growth 12Earnings Growth Spreads 13Pricing 14-15
Figure 1.
02 03 04 05 06 07 08 09 10 11 12 13 14200
300
400
500
10/19S&P 500 HEALTH CARE
02 03 04 05 06 07 08 09 10 11 12 13 14250
300
350
400
450
500
550
600
650
700
10/19
S&P 500 HEALTH CARE EQUIPMENT(BAX BCR BDX BSX CFNwi HSP ISRGMDT STJ SYK VAR ZMH)
02 03 04 05 06 07 08 09 10 11 12 13 14200
400
600
800
1000
1200
1400
1600
1800
10/19
S&P 500 BIOTECHNOLOGY(AMGN BIIB CELG GENZ GILD)
02 03 04 05 06 07 08 09 10 11 12 13 140
50
100
150
200
250
10/19
S&P 500 HEALTH CARE FACILITIES(THC)
02 03 04 05 06 07 08 09 10 11 12 13 14100
150
200
250
300
350
400
10/19
S&P 500 HEALTH CARE DISTRIBUTORS(ABC CAH MCK PDCO)
200-day moving average
Source: Standard and Poor’s Corporation.
02 03 04 05 06 07 08 09 10 11 12 13 14120
160
200
240
280
320
360
400
440
480
520
560
600
10/19
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S&P 500 HEALTH CARE SERVICES(DGX DVA ESRX LH MHS)
- S&P 500 Health Care -
Page 1 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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Figure 2.
02 03 04 05 06 07 08 09 10 11 12 13 14100
150
200
250
300
350
400
450
500
550
600
650
700
10/19
S&P 500 MANAGED HEALTH CARE(AET CI CVH HUM UNH WLP)
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14200
250
300
350
400
450
500
550
600
10/19
S&P 500 PHARMACEUTICALS_____________________________ABT AGN BMY BRL FRX JNJ LLYMRK MYL PFE SGP WPI WYE
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- S&P 500 Health Care (cont) -
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Figure 3.
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14200
300
400
500
600
700
10/19
S&P 400 HEALTH CARE
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14225
275
325
375
425
475
525
575
625
675
725
775
10/19
S&P 400 HEALTH CARE EQUIPMENT_______________________________BEC CYTC EW EYE HB IMDC ISRG STEVAR VARI
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14300
400
500
600
700
800
900
1000
1100
1200
1300
10/19S&P 400 BIOTECHNOLOGY_______________________AFFX CEPH CRL IVGN MATK MLNM PDLITECH VRTX
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 1450
100
150
200
250
10/19
S&P 400 HEALTH CARE FACILITIES______________________________CYH LPNT TRI UHS WOOF
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14200
250
300
350
400
450
500
550
10/19
S&P 400 HEALTH CARE DISTRIBUTORS___________________________________HSIC
Source: Standard & Poor’s Corporation.
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 1480
100
120
140
160
180
200
220
240
260
280
10/19
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S&P 400 HEALTH CARE SERVICES______________________________AHG CVD LNCR OCR PPDI
- S&P 400: Health Care -
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Figure 4.
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 140
200
400
600
800
1000
10/19
S&P 400 PHARMACEUTICALS_________________________MRX PRGO PRX SEPR VRX
200-day moving average.Source: Standard & Poor’s Corporation.
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 140
100
200
300
400
10/19
S&P 400 MANAGED HEALTH CARE______________________________HNT
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- S&P 400 Health Care (cont) -
Page 4 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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-20
-10
0
10
2014.0
Figure 5.S&P 500 LargeCap
All Sectors
-20
-10
0
10
20
12.3
S&P 400 MidCap
-20
-10
0
10
20
10.5
S&P 600 SmallCap
-10
0
10
20
30
40
17.1Health CareSector
-10
0
10
20
30
40
24.7
-20
-10
0
10
20
30
10.0
-30-101030507090
110
35.2Biotechnology
-30-101030507090
110
86.1
-30-101030507090
110
-1.2
-10
0
10
20
30
9.7Health CareDistributors
-10
0
10
20
30
13.2
-10
0
10
20
30
10.2
-25
-5
15
35
55
13.2Health CareEquipment
-25
-5
15
35
55
24.9
-25
-5
15
35
55
26.1
-50
-30
-10
10
30
14.6
Health CareFacilities
-50
-30
-10
10
30
14.6
-50
-30
-10
10
30
9.5
-40
-20
0
20
4032.3
Health CareServices
HC Supplies
Health CareTechnology
-40
-20
0
20
40
15.0
-40
-20
0
20
4027.6
-15
-5
5
15
25
35
45
24.4
-40
-20
0
20
40
60
-15.1
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2012
-30-20-10
010203040
18.2Life SciencesTools & Services
Source: Standard & Poor’s Corporation.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2012
-30-20-10
010203040
11.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2012
-30-20-10
010203040
28.7
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- Health Care: S&P Sector and Cap, Year-to-Date -
Page 5 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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-20
0
20
40
60
80
5.1
Figure 6.S&P 500 LargeCap
ManagedHealth Care
-40
-20
0
20
40
60
80
12.4
S&P 400 MidCap
-40
-20
0
20
40
60
80
-7.1
S&P 600 SmallCap
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2012
-30
-10
10
30
50
15.5Pharmaceuticals
Source: Standard & Poor’s Corporation.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2012
-30
-10
10
30
50
1.7
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2012
-30
-10
10
30
50
-4.7
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- Health Care: S&P Sector and Cap, Year-to-Date -
Page 6 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201475
150
225
300
375
450
525
75
150
225
300
375
450
525
10/19
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200-day moving average.* Ratio scale.
Source: Standard & Poor’s Corporation and Haver Analytics.
S&P 500 HEALTH CARE INDEX*
Figure 7.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20146
11
16
21
26
31
36
41
6
11
16
21
26
31
36
41
Oct
1112
13
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* Time-weighted average of current and next years’ consensus earnings estimates.Source: Thomson Reuters I/B/E/S.
S&P 500 HEALTH CARE OPERATING EARNINGS PER SHARE(analysts’ average forecasts, ratio scale)
Consensus Forecasts__________________
Annual Estimates
12-Month Forward*
Figure 8.
- Health Care Sector -
Page 7 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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5
10
15
20
25
30
35
5
10
15
20
25
30
35
Oct
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014.50
.75
1.00
1.25
1.50
.50
.75
1.00
1.25
1.50
Oct
yardeni.com
* Price divided by 12-month forward consensus expected operating earnings per share using mid-month data.** Sector or industry forward P/E relative to S&P 500 forward P/E.
Source: Thomson Reuters I/B/E/S.
S&P 500 HEALTH CARE VALUATION
Forward P/E*
Relative P/E**
Figure 9.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-20
-15
-10
-5
0
5
10
15
20
-20
-15
-10
-5
0
5
10
15
20
Oct
yardeni.com
* Three-month moving average of the number of estimates up less number of estimates down, expressed as a percentage of the total number of estimates.Source: Thomson Reuters I/B/E/S.
S&P 500 HEALTH CARE NET EARNINGS REVISIONS*
Figure 10.
- Health Care Sector -
Page 8 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
100
200
300
400
500
600
700
800
900
1000
1100
0
100
200
300
400
500
600
700
800
900
1000
1100
Oct
S&P 500 FORWARD EARNINGS:* HEALTH CARE(1997=100)
Health Care
Biotechnology
Health Care Equipment
Managed Health Care
* Price divided by 12-month forward consensus expected operating earnings per share using mid-month data.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 11.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70
Oct
S&P 500 FORWARD P/E RATIOS:* HEALTH CARE
Health Care
Biotechnology
Health Care Equipment
Managed Health Care
* Price divided by 12-month forward consensus expected operating earnings per share using mid-month data.Source: Thomson Reuters I/B/E/S.
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Figure 12.
- Relative Earnings & P/E: Health Care -
Page 9 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-50
0
50
100
150
200
250
300
350
400
450
-50
0
50
100
150
200
250
300
350
400
450
Oct
S&P 500 FORWARD EARNINGS:* HEALTH CARE(1997=100)
Health Care
Health Care Distributors
Health Care Facilities
Pharmaceuticals
* Price divided by 12-month forward consensus expected operating earnings per share using mid-month data.Source: Thomson Reuters I/B/E/S.
yardeni.com
Figure 13.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20145
10
15
20
25
30
35
40
5
10
15
20
25
30
35
40
Oct
S&P 500 FORWARD P/E RATIOS:* HEALTH CARE
Health Care
Health Care Distributors
Health Care Facilities
Pharmaceuticals
* Price divided by 12-month forward consensus expected operating earnings per share using mid-month data.P/E capped at 35 for all industries.Source: Thomson Reuters I/B/E/S.
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Figure 14.
- Relative Earnings & P/E: Health Care -
Page 10 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
Q2
S&P 500 OPERATING PROFIT MARGINS: HEALTH CARE(trailing 4-quarter EPS, percent)
Health Care Sector (9.0)
Biotechnology (29.3)
Health Care Equipment (17.6)
Managed Health Care (4.6)
Source: Standard & Poor’s Corporation, Thomson Reuters I/B/E/S, and Haver Analytics.
yardeni.com
Figure 15.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-5
0
5
10
15
20
25
-5
0
5
10
15
20
25
Q2
S&P 500 OPERATING PROFIT MARGINS: HEALTH CARE(trailing 4-quarter EPS, percent)
Health Care Sector (9.0)
Health Care Facilities (2.4)
Pharmaceuticals (21.5)
Health Care Distributors (1.2)
Source: Standard & Poor’s Corporation, Thomson Reuters I/B/E/S, and Haver Analytics.
yardeni.com
Figure 16.
- Profit Margin -
Page 11 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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Figure 17.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-5
0
5
10
15
20
25
30
35
-5
0
5
10
15
20
25
30
35
Oct
S&P 500 HEALTH CARE vs. S&P 500(percent)
STEG*_____
S&P 500 Health CareS&P 500
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20145
10
15
20
5
10
15
20
Oct
LTEG*_____
S&P 500 Health CareS&P 500
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-5
0
5
10
15
20
-5
0
5
10
15
20
OctS&P 500 Health Care__________________
STEG*
LTEG*
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* Short-term earnings growth: 12-month forward consensus expected earnings growth. Long-term earnings growth: 5-year forward consensus expected earnings growth.Source: Thomson Financial.
- Earnings Growth -
Page 12 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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Figure 18.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-20
-15
-10
-5
0
5
10
-20
-15
-10
-5
0
5
10
Oct
S&P 500 HEALTH CARE VS S&P 500(percentage points)
Health Care Less S&P 500 STEG*
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-5
-4
-3
-2
-1
0
1
2
3
-5
-4
-3
-2
-1
0
1
2
3
SepHealth Care LessS&P 500 LTEG*
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-7
-6
-5
-4
-3
-2
-1
0
1
2
3
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
Oct
Health Care STEG*Less Health Care LTEG*
yardeni.com
* Short-term earnings growth: 12-month forward consensus expected earnings growth. Long-term earnings growth: 5-year forward consensus expected earnings growth.Source: Thomson Financial.
- Earnings Growth Spreads -
Page 13 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 140
5
10
15
0
5
10
15
Aug
Sep
CONSUMER PRICES(yearly percent change)
Medical Care___________
PCED*
CPI
* Personal consumption expenditures deflator.Source: US Department of Labor, Bureau of Labor Statistics and US Department of Commerce, Bureau of Economic Analysis.
yardeni.com
Figure 19.
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 140
5
10
15
0
5
10
15
Sep
CONSUMER PRICES(yearly percent change)
Prescription Drugs_______________
PCED*
CPI
* Personal consumption expenditures deflator.Source: US Department of Labor, Bureau of Labor Statistics and US Department of Commerce, Bureau of Economic Analysis.
yardeni.com
Figure 20.
- Pricing -
Page 14 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 140
2
4
6
8
10
12
14
16
18
0
2
4
6
8
10
12
14
16
18
Aug
Sep
CONSUMER PRICES(yearly percent change)
Hospitals________
CPI
PCED*
* Personal consumption expenditures deflator.Source: US Department of Labor, Bureau of Labor Statistics and US Department of Commerce, Bureau of Economic Analysis.
yardeni.com
Figure 21.
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14-2
0
2
4
6
8
10
12
14
-2
0
2
4
6
8
10
12
14
Sep
CONSUMER PRICES(yearly percent change)
Physician Services________________
CPI
PCED*
* Personal consumption expenditures deflator.Source: US Department of Labor, Bureau of Labor Statistics and US Department of Commerce, Bureau of Economic Analysis.
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Figure 22.
- Pricing -
Page 15 / October 22, 2012 / Analyst’s Handbook: Health Care www.yardeni.com
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