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The Medical Services sector is undergoing a rapid transformation driven by advances in digital health, wider adoption of value-based care, and a stronger focus on patient-centric and precision medicine solutions. Demand for remote treatment continues to accelerate growth in telemedicine and AI-powered analytics, with providers using these tools to improve diagnostics, streamline operations, and deliver more personalized, preventive care.

According to a Precedence Research report, the global healthcare analytics market was estimated at $53.12 billion in 2024 and is forecast to expand at a CAGR of 21.4% (2025-2034) to reach roughly $369.7 billion by 2034, a tailwind for payers, providers, and analytics vendors.

Stocks like Labcorp Holdings (LH - Free Report), Charles River Laboratories (CRL - Free Report), and Teladoc Health (TDOC - Free Report) are poised to benefit from this shift. At the same time, workforce constraints are a rising headwind for traditional, labor-intensive care settings. Mercer’s labor-market modelling projects significant shortages, with a projected shortfall of over 100,000 healthcare workers by 2028, including 73,000 nursing assistants. This will elevate labor costs, though tech-driven care models are driving new, specialized roles.

The Industry's Description

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-based 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.

3 Trends Shaping the Future of the Medical Services Industry

Digital Revolution: The adoption of digital platforms within the medical device space is gaining prominence in the United States. Going by a Research and Markets report, the U.S. digital health market is now forecast to grow from about $145.9 billion in 2024 to $396.7 billion by 2028 at a CAGR of 28.4% (2024-2028). The increasing availability of unstructured health data, advanced analytics, and the demand for personalized medical services underscore the growing importance of big data in healthcare.

Additionally, the “Big Data in Healthcare” market continues to witness strong forecasts. 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: It has been more than two years since the pandemic ended, but the pressure it placed on the global health workforce continues to leave a lingering impact. Many frontline professionals exited the field or reduced hours amid burnout and fatigue, while an aging population and the growing cases of chronic diseases have intensified the demand for care.

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 11 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 an HR for Health report,  increased labor costs and staffing challenges have resulted in 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 35% from 2024 to 2034, much faster than the average for all occupations. About 32,700 openings for nurse anesthetists, nurse midwives, and nurse practitioners are projected each year, on average, over the next decade.

The Zacks Industry Rank Indicates Dull Prospects

The Zacks Medical Services industry falls within the broader Zacks Medical sector. It carries a Zacks Industry Rank #157, which places it in the bottom 35% of 243 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates gloomy 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 recent valuation first.

The Industry Underperforms the Sector and S&P 500

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 14.9% during the said time frame compared with the Medical sector’s 10.1% dip and the S&P 500 composite’s surge of 19.7%.

One-Year Price Performance
 

Image Source: Zacks Investment Research

The Industry's Recent Valuation

On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing medical stocks, the industry has been trading at 15.1X compared with the S&P 500’s 23.7X and the sector’s 20.1X.

Over the last five years, the industry has traded as high as 19.5X, as low as 13.3X, and with a median of 15.5X, as the charts below show.

Price-to-Earnings Forward Twelve-Months (F12M)
 

Image Source: Zacks Investment Research

Price-to-Earnings Forward Twelve-Months (F12M)
 

Image Source: Zacks Investment Research

3 Stocks to Buy Right Now

Below, we present three stocks from the Medical Services industry that have been witnessing positive earnings estimate revisions and have maintained positive Zacks Rank ratings.

Labcorp

This company is expanding test offerings in its key specialty areas, including oncology, women's health, neurology, and autoimmune diseases. This also helps accelerate growth across LabCorp’s core testing portfolio. The company sees a strong opportunity to become a preferred development lab with the growing biopharma focus on cell and gene therapy. Additionally, Labcorp leverages AI and technology to drive margin efficiency and enhance customer experience.

The company's 2025 expected earnings growth rate is 11.9%. The Zacks Consensus Estimate for Labcorp’s 2025 revenues indicates a rise of 7.7% from 2024.

Price and Consensus: Labcorp
 

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Charles River Lab

This company gains from steady demand for research model services, particularly in the GEMS and Insourcing Solutions businesses. Charles River Lab continues to appeal to clients seeking cost-effective solutions for their vivarium space requirements. Strategic acquisitions and collaborations help expand the company’s capabilities across the drug discovery and early-stage development continuum.

Charles River Lab’s 2026 earnings growth rates are pegged at 4.9% on expected revenue growth of 2.6%. Charles River Lab has a long-term historical earnings growth rate of 8.1%.

Price and Consensus: Charles River Lab
 

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Teladoc

Headquartered in Purchase, NY, Teladoc provides virtual access to high-quality care and expertise through a portfolio of services and solutions. These services cover several medical subspecialties, ranging from non-urgent, episodic needs like flu and upper respiratory infections to chronic, complicated medical conditions such as cancer and congestive heart failure.

Teladoc continues to leverage acquisitions, a broad platform, and a global network to strengthen its international presence and diversify revenues. Teladoc’s 2025 and 2026 expected earnings growth rates are 80.1% and 26.9%, respectively.

Price and Consensus: Teladoc
 

Image Source: Zacks Investment Research 

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