Health Care Innovation Drives S&P Growth - The Minute

Feb 9, 2015 4:00 PM ET
Multimedia with summary

Disruptive change in health care is having a booster effect on the economy. From the Affordable Health Care Act to biotech, innovations in services and products are generating record profits, according to the Wall Street Journal’s Kristen Scholer. While health care is only the third largest S&P 500 sector, it has been the largest contributor to overall earnings growth for the S&P in three of the last four quarters. The sector has lifted the overall fourth-quarter earnings growth rate more than any other, according to FactSet, a data firm.

Health-care companies in the S&P 500 are expected to post fourth-quarter growth of 19.1 percent, the most of any sector after telecom. Without that health care boost, S&P earnings for the quarter would be flat, as opposed to being up two point one percent when the sector’s profits are included.

The rapid growth of biotech companies is the primary driver of the health care sector’s earnings, notes Scholer. Earnings among biotechs rose more than 60 percent in every quarter last year. Gilead, a company with new hepatitis C drugs, recorded growth of 278 percent, with earnings of 3.5 billion in the fourth quarter. That’s more than the company recorded in total sales during the same period last year.

I’m John Howell for 3BL Media.

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