ASX healthcare shares have been one of the top-performing sectors on the ASX in the past 12 months. The S&P/ASX 200 Health Care Index (ASX: XHJ) has climbed more than 12.5% in that time, compared to the benchmark S&P/ASX 200 Index (ASX: XJO)'s 4.43% rise.
Several shares within the sector have seen outsized growth in 2024, with Pro Medicus Ltd (ASX: PME) and ResMed Inc (ASX: RMD) leading the charge.
Pro Medicus is up 36% year to date, while ResMed has climbed 28%.
Let's dive into what's driving these gains and why these shares might be worth considering for your portfolio.
ASX healthcare share shows dominance
Pro Medicus has been a standout performer on the ASX this year and closed the session on Monday at $130.85 per share.
This med-tech stock has captured investor attention in 2024 with its strong financial performance and strategic growth initiatives.
1. Strong financial performance
Pro Medicus reported strong H1 FY24 numbers. Revenues were up by 30% year over year to $74.1 million.
The ASX healthcare shares' earnings before interest and tax (EBIT) margin stood at an impressive 66%, translating to EBIT growth of 31.5% to $49 million.
Meanwhile, net profits were up 33%. As such, almost every dollar of revenue growth translated into a corresponding dollar of earnings growth.
As my colleague Tristan recently reported, performances like this have allowed Pro Medicus to maintain a debt-free balance sheet.
2. Contracts
Pro Medicus' recent contract wins have been substantial. The latest being five new deals worth a combined $45 million to the business.
These contracts span five to eight years, boosting the company's total contract value for FY24 to $245 million.
Such wins underscore the company's ability to grow and maintain its market leadership, analysts at Goldman Sachs say.
The broker rates Pro Medicus a buy with a $136 per share valuation on the ASX healthcare stock.
Breathing easy
ResMed shares have also performed well so far this year. Several tailwinds have pushed the ASX healthcare stock higher.
1. Impressive Q4 results
For the fourth quarter of FY24, ResMed reported a 9% increase in revenue to US$1.2 billion. This growth was driven by a strong demand for sleep devices and masks.
The company's Software as a Service (SaaS) business also saw significant growth.
As a result, ResMed's gross margin improved by 350 basis points, contributing to quarterly earnings per share of US$1.98.
ResMed's CEO, Mick Farrell, sees an addressable market of nearly 2.5 billion people for the company. In a sea of red on Monday, the ASX healthcare share was one of the only names left in the green.
2. Positive outlook
Brokers are generally positive on ResMed shares. Morgans rates the stock a buy with a $36.25 per share price target, taking particular note of the respiratory player's recent earnings.
Macquarie analysts also rate the stock a buy with the exact same price target. Again, the broker was impressed with ResMed's quarterly update and sees continued growth ahead.
According to my colleague James, Macquarie has the ASX healthcare share as one of its "top picks" for the sector.
Foolish takeaway
Both Pro Medicus and ResMed are two ASX healthcare shares that have outperformed in 2024.
Pro Medicus's impressive contract wins, and ResMed's solid quarterly results highlight their market leadership.
As always, remember to conduct your own due diligence and consult professional advice when needed.
