Healthcare stocks displayed new vigor in the last quarter as earnings for the sector improved. In fact, according to J.P. Morgan, the earnings growth rate for the healthcare sector stands at about 5% year-over-year, compared with a roughly 6% decline for overall corporate earnings.

We’ve been heartened by the renewed earnings strength, even as the share price performance among our holdings has been mixed given volatility in stock and currency markets over the last year. We also have been excited to see healthcare companies’ renewed efforts to add new drugs as well as manage costs better.

Conservative Portfolio holding and #1 Best Buy Merck & Co. ( NYSE: MRK) beat analyst profit estimates this last quarter, reporting a 2% increase to $2.49 billion, or 89 cents per share, compared to last year’s first quarter.

Revenue, after factoring in currency exchange effects, fell 1.3% to $9.31 billion last quarter. Overall, we believe Merck’s revenue, like that of many healthcare companies, will be under pressure in the medium term as the drugmaker cycles through older medicines that face more generic competition while developing new ones to market. But over the long term, we see Merck’s revenue and profits steadily building strength as new products are released.

For example, Merck continued to face increased price competition from generics against its older Remicade drug for the treatment of inflammatory disorders. Yet, at the same time, sales of its newest immunotherapy drug, cancer-fighting Keytruda, has tripled to $249 million. And its top drug, Januvia, topped sales estimates, hitting $906 million in the quarter.

Had it not been for currency issues, the company believes revenue would have grown 3%, driven by its human health and animal health divisions, according to company materials.

In fact, management has narrowed and increased its revenue and earnings guidance for 2016.

Merck expects 2016 earnings in the range of $3.65 to $3.77 per share, including a 2% hit from foreign exchange at mid-April exchange rates. The company’s previous guidance was $3.60 to $3.75 per share, after accounting for currency woes of about 4%. Revenue is now expected to range from $39 billion to $40.2 billion. The company’s previous guidance was revenue of $38.7 billion to $40.2 billion.

With a dividend yield of 3.32%, Merck is a Buy up to $65.

GlaxoSmithKline’s (NYSE: GSK) reorganization and more competitive products are finally starting to pay off. The firm reported its first quarterly profit in two years in what is expected to be the beginning of invigorated growth momentum.

Core earnings per share, a measure that strips out one-time gains or impairments, increased 14% to 29 cents in the three months ending March 31, while revenue rose 11% to $9.04 billion. After stripping out exchange rate movements, revenue and core EPS both increased 8%.

A familiar trend of renewal in the healthcare industry, the turnaround is attributed to the higher demand for vaccines and the firm’s recently launched respiratory and HIV medicines, which are offsetting declines in older drugs, such as its lung treatment drug, Advair.

Management forecasts 2016 core EPS percentage growth of 10% to 12% at constant exchange rates.

With a dividend yield of 5.14%, GlaxoSmithKline is a Buy up to $54

New product development costs and sales declines in its cancer drugs from generics competition dragged down Novartis’s (NYSE: NVS) earnings in the first quarter.

Revenue slipped 3% to $11.6 billion from $11.9 billion a year earlier. Core net income fell 13% to $2.8 billion. Still, that exceeded the $2.68 billion that analysts predicted. Sales increased 1% and core net income fell 6% if you remove the effects of currency.

Novartis management believes its new drug pipeline, containing drugs such as Entresto for heart failure and Cosentyx for psoriasis, will offset declines in its older product line.

Cosentyx has shown early success, producing revenue of $176 million. Entresto, which so far has only brought in a measly $17 million, is still expected by management to bring in $200 million this year as the firm has bulked up the sales force for this product. The company also expects Tafinlar and Mekinist, two drugs for advanced melanoma, to help offset sales declines from generic competition.

Meanwhile, the company’s earnings were hurt by costs related to a turnaround in its eye care unit Alcon, where the firm will in the future focus exclusively on surgical and vision care businesses. The restructuring plan in the Alcon division is expected to produce savings of $1 billion through 2020.

We’ve been slightly disappointed in this company’s execution, even though we recognize that the firm’s complicated asset swap with GlaxoSmithKline, which itself was affected by the reorganization, will take time to produce value for shareholders.

With a dividend yield of 3.66%, Novartis remains a Buy at $100.