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The healthcare sector, represented by the Health Care Select Sector SPDR Fund (NYSEARCA:XLV), underperformed the broader market significantly in Q2 2025. With a 12.12% weighting in the S&P 500, healthcare declined by 5.96% while the S&P 500 gained approximately 10.15%. Year-to-date, the sector is down 2.02%, considerably lagging the benchmark’s 5.50% rise.
Despite broader market challenges, seven S&P sectors remain in positive territory year-to-date. The Industrial Select Sector SPDR® Fund ETF (XLI) and the Communication Services Select Sector SPDR® Fund (XLC) are leading these gains. Conversely, the healthcare sector is the worst-performing S&P 500 sector year-to-date, followed by the Consumer Discretionary Select Sector SPDR® Fund ETF (XLY) and the Energy Select Sector SPDR® Fund ETF (XLE).
With earnings at the doorstep, we look at the sector’s performance and where its constituents stand on SA’s quant rating system.
Top 5 S&P 500 healthcare performers in Q2:
IDEXX Laboratories (NASDAQ:IDXX) +28.97%
DexCom (NASDAQ:DXCM) +28.86%
Cardinal Health (NYSE:CAH) +23.13%
Insulet (NASDAQ:PODD) +21.42%
Align Technology (NASDAQ:ALGN) +18.92%
IDEXX Laboratories (NASDAQ:IDXX) reported solid Q1 FY25 results with 4.7% organic revenue growth and 7% adjusted EPS growth, despite low US clinical visits. Management projects 6%-9% organic revenue and 8%-12% adjusted EPS growth for FY25. I maintain a Buy rating with a target price of $523 per IDXX share due to expected consumer spending normalization,” a Seeking Alpha analyst wrote.
Bottom 5 S&P 500 healthcare performers in Q2:
UnitedHealth (NYSE:UNH) -39.55%
Becton, Dickinson and Company (NYSE:BDX) -24.29%
Bristol Myers Squibb (NYSE:BMY) -22.88%
Thermo Fisher Scientific (NYSE:TMO) -18.93%
Zimmer Biomet Holdings (NYSE:ZBH) -18.75%
“The outlook for UnitedHealth (NYSE:UNH) is negative due to rising gross margin pressures from increased insurance use and Medicare Advantage funding issues. Lower valuations compared to peers are warranted because of falling earnings expectations. The UNH versus S&P 500 shows a strong bearish trend with no buyer interest, and potential margin pressures in Optum Health and Optum Rx are concerning,” a Seeking Alpha analyst wrote.
The market is exaggerating the negative effects of policy changes and investigations on UnitedHealth Group. Despite challenges, UNH’s diverse business model offers resilience and growth potential,” another Seeking Alpha analyst noted.
What Quantitative Measures Say
Seeking Alpha’s Quant Rating system gives the healthcare sector a Neutral score of 3.12 out of 5. The rating system considers factors such as valuation, earnings growth, and recent stock performance, with 5 being the top score.
The system, which evaluates factors like valuation, earnings growth, and recent stock performance, assigns the sector an “A” for profitability. However, it struggles in other areas, earning a “D+” in growth, a “B-” in momentum, a “C-” in valuation, and a “C+” in EPS revisions.
Out of the sector’s 63 constituents, 2 company has a Strong Buy rating, 2 company has a Buy rating, 57 have a Hold rating and 2 have a Strong Sell rating.
Bristol Myers Squibb (NYSE:BMY) has the highest score of 4.69 with a Strong Buy rating as the company is losing exclusivity for important drugs, but new launches and debt reduction help the outlook. Acquisitions have improved the pipeline, though revenue relies on a few drugs, raising risks. Concerns about growth and scrutiny make me cautious about near-term gains,” a Seeking Alpha analyst wrote.
Following Bristol Myers Squibb, other companies and their quant ratings were: Centene Corporation (CNC) rating of 4.50, Gilead Sciences (GILD) rating of 4.38 and Incyte Corporation (INCY) with a quant rating of 4.07.
For Q2, quant-rated stocks with the lowest performance include Teleflex (NYSE:TFX) and Moderna (NASDAQ:MRNA), which earned “Strong Sell” ratings of 1.28 and 1.18. Both companies were particularly dinged on their growth prospects. Teleflex’s (TFX) Q1 results slightly exceeded expectations but declined year-over-year, leading to lowered EPS guidance, negative Wall Street sentiment, and uncertainty about its split and trade policies.
The COVID vaccine maker Moderna (MRNA) has faced a tough year, losing more than a third of its value due to decreased sales of its COVID-19 vaccine, the withdrawal of its flu/COVID candidate, and a $700 million funding loss for bird flu research. Despite a new COVID vaccine for high-risk groups, there is market doubt about revenue. The company is focusing on cost-cutting and setting realistic revenue goals to improve by 2025.
Industries Q2 performance
The Health Care Equipment & Services sector declined 6.73% in Q2, while Pharmaceuticals, Biotechnology and Life Sciences is down 6.43% in Q2.
Here are some of the important healthcare stories from this week:
A U. S. federal judge has halted the Trump administration’s plans to reduce the workforce and close agencies in the Department of Health and Human Services. Judge Melissa DuBose issued an injunction after a legal challenge from a group of Democratic-led states that opposed Secretary Robert F. Kennedy Jr. ‘s proposal to merge agencies and cut 10,000 jobs.
Centene (CNC) has withdrawn its 2025 profit and adjusted profit per share guidance due to unmet market growth in 22 out of 29 states and higher overall health risks in these states, according to the company. This decision was based on the company’s risk adjustment revenue calculations, which were not met.
Novo Nordisk (NVO) has launched its blockbuster weight-loss drug Wegovy (semaglutide) in India, shortly after rival Eli Lilly (LLY) introduced its popular weight loss/diabetes therapy Mounjaro in the country this March.
Separately, Amgen (AMGN) shared positive mid-stage trial results for its new weight-loss treatment, MariTide, demonstrating an average 20% weight loss over 52 weeks in obese patients without Type 2 diabetes.