Healthcare Sector Earnings Growth Slows ⁤in 2025, ‍Despite Potential

⁤ Updated June 03, 2025
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The healthcare sector’s expected earnings per share (EPS) growth has decelerated faster then anticipated ⁣in 2025. Despite this slowdown, healthcare still ranks among the sectors with the strongest projected growth this year, alongside technology and dialog services.

Bank of America analysis indicates that while the ‍sector reported solid Q1 2025 earnings, revisions for⁤ Q2 ⁤and Q3 show lower⁢ or even negative growth. Full-year 2025 estimates, initially at 16%⁢ in⁣ April,⁤ have ‍as⁤ dropped to 9%.

Several‍ factors contribute to these headwinds.⁤ Potential policy shifts, including⁤ appointments and⁣ attitudes toward vaccines, tariff concerns, ⁤Medicaid funding reductions impacting lower-income ‍individuals’ access to prescriptions and healthcare services, and presidential initiatives to lower Medicare prescription costs, all play a⁢ role in⁣ the healthcare sector’s performance.

Even Eli ⁣Lilly, a major player ⁢in the pharmaceutical ‍space known for ⁤drugs like zepbound and Mounjaro, experienced a⁤ 4% decline as of May 30, 2025, even though ⁣its stock is currently oversold on daily and weekly charts.

Johnson & Johnson has performed well, ⁢with a 9.25% year-to-date increase. The iShares U.S.‍ Medical Devices ETF also shows ⁢strength, with a 6.13% gain year-to-date.

The‍ lack of relative strength in the healthcare sector presents a puzzle, considering ‍its earnings trends. The healthcare sector’s expected EPS⁣ growth is stronger than that of the communication sector this year.

What’s next

Monitoring the relationship between earnings trends and sector performance ‍will be key. The ⁣healthcare sector may become an⁣ attractive ⁢addition to client accounts in the future.