Major companies in the health care sector report earnings over the next several weeks. Here’s a look at what’s been going on in the sector ahead of Q2 earnings reports.
Throughout most of 2018, the health care sector’s performance has been moving in line with the S&P 500 (SPX). That could deviate as Q2 earnings season gets underway in the next few weeks.
For Q2, the S&P 500 health care sector is expected to report 9.8% year-over-year earnings growth and 5.9% revenue growth, according to FactSet. The S&P 500’s overall earnings growth and revenue growth is expected to increase 20% and 8.8%, respectively.
While the topics still come up from time to time, concerns over drug pricing and Washington’s focus on different aspects of the healthcare system seems to have abated somewhat in 2018 and haven’t weighed on the sector as much as they did in 2017.
Some uncertainty was removed when President Trump announced in May his administration’s plans to reduce drug prices. The plans reiterated a lot of previous points the Trump administration had made regarding high list prices, the rebate system, and making it easier for generics to be developed, so there wasn’t as much of a market reaction as there had been in the past when the news initially broke.
One area that some analysts have said they still see as a potential risk for health care stocks is if any major changes to Medicare or Medicaid are enacted. There have been bills put forth in Congress that seek to reduce the U.S. deficit by cutting from those two programs, which accounted for roughly 37% of the $3.3 trillion in national healthcare expenditures in 2016, according to the Center for Medicare and Medicaid Services.
These topics are likely to still come up from time to time, potentially adding to volatility in the sector.
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