Which of These 4 Top Healthcare Stocks have the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here’s your Cheat Sheet to how these top 4 healthcare stocks rank via earnings trends:

St. Jude Medical Inc. (NYSE:STJ): Current Price $40.88

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 4,363 4,681 5,165 5,612 5,503
Diluted EPS ($) 1.01 2.26 2.75 2.52 2.39

St Jude’s annual revenue grew nicely until 2011, and EPS until 2010. Business seems to be slow thereafter…

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 1,407 1,395 1,410 1,326 1,372
Diluted EPS ($) 0.40 0.67 0.78 0.56 0.39

A mixed quarterly performance from St Jude’s. We note that revenue is flat, and EPS has fallen off in the last two quarters. This company does not make the grade…

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WellPoint Inc. (NYSE:WLP): Current Price $66.17

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 61,250 64,940 58,700 60,710 61,710
Diluted EPS ($) 4.76 9.88 6.94 7.25 8.18

WellPoint certainly got its act together after hitting a bottom in 2010. The company resumed growing both annual revenue and EPS.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 15,320 15,420 15,410 15,350 15,540
Diluted EPS ($) 1.02 2.53 1.94 2.15 1.51

Wellpoint’s quarterly numbers are nothing to write home about. Revenue growth is flat and EPS dropped off in the December 2012 quarter. We’ll be avoiding this stock for now…

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Medtronic, Inc. (NYSE:MDT): Current Price $46.42

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 13,520 14,600 15,390 15,510 16,180
Diluted EPS ($) 1.87 1.84 2.79 2.86 3.41

There’s steady growth here in both revenue and EPS. We hope the quarterlies will give us cause to cheer..

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Oct. 31, 2011 Jan. 31, 2012 Apr. 30, 2012 Jul. 31, 2012 Oct. 31, 2012
Revenue ($) in millions 4,023 3,918 4,297 4,008 4,095
Diluted EPS ($) 0.82 0.88 0.94 0.83 0.63

Unfortunately, Medtronic belies our expectations with its quarterly results. EPS has fallen in each of the last two quarters. We’ll pass on this one…

Aetna Inc. (NYSE:AET): Current Price $49.76

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 27,600 30,950 34,760 34,250 33,780
Diluted EPS ($) 3.47 2.83 2.84 4.18 5.22

Aetna impresses us with their annual EPS growth in its annual EPS. However, revenue numbers appear to be under pressure…

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 8,475 8,572 8,916 8,835 8,916
Diluted EPS ($) 1.30 1.03 1.43 1.32 1.47

Aetna’s quarterly revenue has remained mostly flat over the last two periods, but we see its EPS in September 2012 is the highest in the five quarters under review. EPS is also higher quarter-over-quarter.

Conclusion

We find that Aetna has demonstrated the best earnings trend among its rivals in this space. It’s annual EPS improved during the last three years, while quarterly EPS rose in the latest quarter. Aetna is awarded the award for ourĀ “E-Squared” investment analysis.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!