MW Healthcare companies are hiring. Is it time to look for growth stocks in this beaten-down sector?

By Tomi Kilgore and Philip van Doorn

The recent jobs data showed that hiring in healthcare took a big jump in May, as the stock sector has stabilized a bit after years of underperformance

The government's May jobs report released Friday shined a sorely needed, positive light on the healthcare sector - which has suffered a beating, relative to the broader stock market, for years.

Following the release of upbeat data and given some recent signs of stabilization in the stocks, MarketWatch took at look at companies in the healthcare sector that are expected to produce the fastest compounded growth rate for sales over the next two years.

We thought to do the screen was because the U.S. Bureau of Labor Statistics said that 62,000 healthcare jobs were added in May - the most of any sector, and close to half of the total of 139,000 jobs added. The number of new healthcare jobs was roughly 40% more than the sector's average monthly gain over the past 12 months.

Another bright spot is that after a pretty rough couple of months amid worries over government spending cuts, as well as public and government backlash over high costs and even a lack of healthcare coverage, the chart below shows how the Health Care Select Sector SPDR ETF XLV appears to have stemmed the bleeding when measured against the S&P 500 index SPX.

While there's still no signal suggesting the two-and-a-half-year downtrend may be over, it couldn't hurt to get ahead of a potential recovery by picking out some stocks to watch.

So we began by looking at the 60 components of the Health Care Select SPDR ETF, an exchange-traded fund that tracks the performance of the healthcare sector of the S&P 500 XX:SP500.35. Like the broader index, and the SPDR S&P 500 ETF Trust SPY that tracks it, XLV is weighted by market capitalization.

This means that Elly Lilly & Co. $(LLY)$ makes up 12.5% of the XLV portfolio. If we add Johnson & Johnson $(JNJ)$, AbbVie Inc. $(ABBV)$, UnitedHealth Group Inc. $(UNH)$ and Abbott Laboratories $(ABT)$, the fund's top five holdings make up more than 37% of the portfolio.

For our deeper dive into XLV, we looked at consensus revenue estimates among analysts polled by FactSet through 2027. The estimates are adjusted for calendar years, since some of the companies have fiscal reporting periods that don't match the calendar.

Here are the 10 companies in the S&P 500 healthcare sector with the highest expected compound annual growth rates $(CAGR)$ for revenue from 2025 through 2027:

   Company                      Ticker    Two-year estimated sales CAGR through 2027 
   Moderna Inc.                 MRNA                                           20.4% 
   Eli Lilly and Co.            LLY                                            18.7% 
   Insulet Corp.                PODD                                           17.1% 
   Intuitive Surgical Inc.      ISRG                                           15.4% 
   DexCom Inc.                  DXCM                                           15.0% 
   Boston Scientific Corp.      BSX                                            10.3% 
   Vertex Pharmaceuticals Inc.  VRTX                                           10.2% 
   Edwards Lifesciences Corp.   EW                                             10.0% 
   Bio-Techne Corp.             TECH                                            9.9% 
   Incyte Corp.                 INCY                                            9.7% 
                                                                     Source: FactSet 

Any stock screen can only provide a snapshot that might be useful as part of your own research. If you are considering individual stocks for investment, you should form your own opinion about a company's ability to remain competitive over the next decade. (One way to extend your research is to click on MarketWatch's stock tickers for more information.)

Read: A detailed guide to the information available on the MarketWatch quote page

-Tomi Kilgore -Philip van Doorn

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

June 06, 2025 16:08 ET (20:08 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.