Chicago, IL – March 28, 2025 – Today, Zacks Equity Research discusses Cencora, Inc. COR, Doximity DOCS and Pediatrix Medical Group, Inc. MD.
Link: https://www.zacks.com/commentary/2436394/3-medical-services-industry-stocks-to-buy-as-ai-fuels-growth
The Medical Services sector is experiencing significant transformation fueled by advancements in technology, increased adoption of value-based care and focus on patient-centric solutions and precision medicine. The rising demand for remote treatment has driven rapid growth in digital healthcare, particularly telemedicine and AI-powered services, utilizing data and analytics. Hospitals and providers are leveraging these tools to enhance diagnostics, streamline operations and improve patient outcomes. Value-based care models are also gaining traction, promoting preventive and personalized treatment strategies.
According to a recent Grand View Research report, the global healthcare analytics market was valued at $43.1 billion in 2023 and is projected to witness a CAGR of 21.1% from 2024 to 2030, benefiting payers, professionals, and patients with advanced insights and services. Stocks like Cencora, Inc., Doximity and Pediatrix Medical Group, Inc. are expected to gain the most from the rapidly transforming healthcare services landscape.
Further, as the world grapples with aging populations, chronic disease prevalence, and healthcare delivery complexities, the demand for skilled nursing professionals has reached unprecedented levels. According to a 2024 report by Mercer, the United States will face a deficit of over 100,000 healthcare workers by 2028, with nursing assistants experiencing the biggest shortfall of over 73,000. This shortage will drive up labor costs and healthcare expenses. However, the nursing care market is evolving, with tech-driven advancements fueling demand for specialized roles.
The Zacks Medical Services industry comprises third-party service providers and caregivers appointed by core healthcare companies for economies of scale. The industry includes pharmacy benefit managers, contract research organizations, wireless MedTech companies, third-party testing labs, surgical facility providers and healthcare workforce solution providers, among others.
Over the years, this industry has strategically moved from volume- to value-based care. The resurgence in medical tourism is further boosting the sector. This changing pattern of care calls for advanced facilities, thus increasing the need to appoint specialized external service providers. With the growing importance of effective healthcare management, the medical service industry has become an integral part of the modern healthcare system.
Digital Revolution: The adoption of digital platforms within the medical device space is gaining prominence in the United States. A 2024 digital health market report by Statista suggests that this market will witness a 9.2% CAGR from 2024 to 2028. The increasing availability of unstructured health data, advanced analytics and the demand for personalized medical services underscores the growing importance of big data in healthcare.
According to a Roots Analysis report, the global big data in healthcare market size is estimated to increase from $78 billion in 2024 to $540 billion by 2035, representing a CAGR of 19.20%. Other reports suggest that companies that adopted artificial intelligence technologies witnessed a 50% reduction in treatment costs and experienced more than 50% improvement in patient outcomes.
Healthcare Staffing Shortage to Continue: The lingering impact of COVID-19 as a global health emergency has driven many frontline workers to exit the field. Added to this, a drastic increase in the aging population in recent times (about 10,000 individuals aged 59-77 are joining Medicare plans daily) has made the healthcare staffing shortage more pronounced. According to McKinsey, while the global economy could generate 40 million new healthcare jobs by 2030, a significant gap remains.
WHO projects a shortfall of 9.9 million physicians, nurses, and midwives worldwide over the same period, highlighting the urgent need for workforce expansion in health systems. Needless to say, this supply shortage has led to a significant rise in healthcare wages. Going by a HR for Health report, increased labor costs and staffing challenges have led to a rise in hospital expenses. Hospitals have experienced a 15.6% increase in labor expenses per adjusted discharge compared to pre-pandemic levels.
Revival in the Nursing Care Market: In 2025, the role of nurses continues to evolve with advancements in medical technologies and shifts in healthcare delivery models. Telehealth and remote patient monitoring have expanded nurses' reach beyond traditional hospital settings, enabling them to provide care in rural or underserved areas.
Specialized nursing roles, such as nurse practitioners, critical care specialists and geriatric nurses, are in high demand due to the growing complexity of patient needs. Going by the Bureau of Labor Statistics, the overall employment of nurse anesthetists, nurse midwives and nurse practitioners is projected to grow 40% from 2023 to 2033, much faster than the average for all occupations. About 31,900 openings for nurse anesthetists, nurse midwives and nurse practitioners are projected each year, on average, over the decade.
The Zacks Medical Services industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #71, which places it in the top 29% of 246 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates flourishing near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
We will present a few stocks that have the potential to outperform the market based on a strong earnings outlook. But it's worth taking a look at the industry's shareholder returns and current valuation first.
The Medical Services Industry has underperformed its sector and the S&P 500 over the past year. The stocks in this industry have collectively lost 17.1% during the said time frame compared with the Medical sector's 9% dip and the S&P 500 composite's surge of 12.2%.
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing medical stocks, the industry is currently trading at 15.5X compared with the S&P 500's 21.18X and the sector's 23.07X.
Over the last five years, the industry has traded as high as 20.12X, as low as 12.53X, and at the median of 15.78X.
Below, we present three stocks from the Medical Services industry that have been witnessing positive earnings estimate revisions and carry a Zacks Rank #1 (Strong Buy) or #2 (Buy) at present.
You can see the complete list of today's Zacks #1 Rank stocks here.
Doximity: It is a digital platform for U.S. medical professionals. Doximity's network members include over 80% of U.S. physicians across all specialties and practice areas. Doximity provides its verified clinical membership with digital tools built for medicine, enabling medical professionals to collaborate with colleagues, stay up to date with the latest medical news and research, manage their careers and on-call schedules and conduct virtual patient visits.
This Zacks Rank #1 stock's fiscal 2026 expected earnings growth rate is pegged at 7.7%. The Zacks Consensus Estimate for DOCS' fiscal 2026 revenues indicates a rise of 11.5% over fiscal 2025.
Pediatrix Medical: The company provides newborn, maternal-fetal, radiology, pediatric cardiology and other pediatric subspecialties physician services in the United States and Puerto Rico. Pediatrix Medical also offers neonatal care services, such as clinical care to babies born prematurely or with complications within specific units at hospitals through neonatal physician subspecialists, neonatal nurse practitioners and other pediatric clinicians.
Pediatrix Medical's 2025 and 2026 earnings growth rates are pegged at 2.7% and 4.1%, respectively. MD has a long-term expected earnings growth rate of 9.5%. The stock sports a Zacks Rank #1 currently.
Cencora: It is one of the world's largest pharmaceutical services companies, focusing on providing drug distribution and related services to reduce healthcare costs and improve patient outcomes. Cencora has established itself as a leader in specialty products, a critical component of its pharmaceutical-centric strategy. Specialty products in COR's portfolio include biologics, biosimilars, cell and gene therapies, plasma-derived medicines and complex injectables.
COR's fiscal 2025 expected earnings growth rate is pegged at 11.6%. The Zacks Consensus Estimate for Cencora's fiscal 2025 revenues indicates a rise of 9.3% over fiscal 2024. The stock carries a Zacks Rank #2 at present.
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