In a report by asset manager Fidelity Worldwide Investment, Fidelity’s healthcare analysts are reporting increased management confidence among healthcare companies. Analysts are also expecting rising returns on capital in the sector. Half of Fidelity’s global analysts anticipate increased dividend payouts in the sector going forward.

 

“The positive prospects for the global healthcare sector are primarily based on scientific progress in medicine and research, such as innovation in the areas of oncology, immunotherapy and gene therapy. Population growth in emerging markets and ageing societies in developed markets means that the healthcare boom is set to continue,” says Leon Tucker, head of equity research, Asia Pacific at Fidelity Worldwide Investment.

 

The Fidelity Analyst Survey is the culmination of an average of 17,000 meetings held each year between the company’s 159 equity and fixed income analysts and corporate decision-makers. The survey monitors views on issues such as confidence levels, capital expenditure, balance sheet strength and dividend payouts.

 

Fidelity’s analysts are also bullish about information technology companies, with more than 90% viewing management confidence as being either stable or rising, says Fidelity.

 

“The positive sentiment is supported by growth prospects, with IT the only sector in which the majority of analysts think their companies are at an expansionary stage in the industrial cycle, while the majority of CEOs see market/end-demand growth leading earnings growth,” adds Tucker. 

 

Consumer companies are also poised to perform well, the survey notes. Consumer firms have healthy balance sheets and almost half of the analysts surveyed expect improving returns on capital in the sector. “As a major beneficiary of the plunge in oil prices, consumer staples companies will continue to enjoy the reduced logistic costs across their supply chain. The underlying growth in earnings is expected to feed through to higher dividends,” says Tucker.

 

The survey also revealed that utility companies now have healthier balance sheets following large-scale asset sales, while the outlook for energy companies appears dim as the sector reels from a lower oil price.

 

“The energy sector is likely to see a significant decline in payouts as operating margins and profits come under severe pressure,” adds Tucker. Around 85% of energy analysts reported deterioration in management confidence, and all energy analysts predict a reduction in capital expenditure in this sector. In addition, 92% of analysts expect a decline in returns on capital.

 

One of the most positive findings of the survey is the strength of dividend expectations across the board: less than 10% overall expect dividends to be cut or scrapped. “Three out of four analysts expect higher dividends from companies in Japan. Almost 50% also predict rising payouts in their sectors in the US. In Europe, a third of analysts see their companies increasing dividends,” says Tucker.