COVID-19 brought the healthcare industry into the spotlight. Healthcare companies’ efforts helped the world recover from the crisis, and the pandemic turned out to be a blessing in disguise for several of them.
However, some established companies are not just the beneficiaries of the COVID-19 pandemic. Their strong product portfolio and pipeline make them well-positioned to benefit from the rising chronic diseases, aging population, and increasing healthcare spending. The pharmaceutical market is expected to grow at a 5.9% CAGR to $1.40 trillion by 2026.
Impressive dividend payouts, broad market reach, and lower valuations make prominent pharma stocks Johnson & Johnson (JNJ) and Pfizer Inc. (PFE) more than COVID-19 plays. Therefore, it could be wise to invest in these stocks now.
Johnson & Johnson (JNJ)
JNJ develops, manufactures, sells health care products, and provides related services. It primarily serves the consumer, pharmaceutical, medical devices, and diagnostics markets and distributes its products through retail outlets and distributors, wholesalers, hospitals, and health care professionals for prescription use. It has a 0.59 beta.
JNJ will pay a $1.13 quarterly cash dividend on September 6, 2022. The stock pays a $4.52 per share dividend annually, translating to a 2.77% yield. The company’s dividend has grown at a 6% rate over the past five years. JNJ has increased its dividends for 59 consecutive years.
On August 24, 2022, the U.S. Food and Drug Administration (FDA) granted marketing authorization for the expanded use of JNJ’s Janssen Pharmaceuticals’ IMBRUVICA for treating pediatric patients above one year with chronic graft-versus-host disease (cGVHD).
Earlier, this was approved by the European Commission in an all-oral, fixed-duration (FD) treatment combination with venetoclax (I+V) for adults with chronic lymphocytic leukemia (CLL). IMBRUVICA is the only BTKi with 12 FDA approvals across seven indications, including five hematologic cancers and cGVHD. This approval will help IMBRUVICA gain wide recognition across various markets.
For the fiscal 2022 second quarter ended July 3, 2022, JNJ’s sales increased 3% year-over-year to $24.02 billion. The company’s gross profit came in at $16.10 billion, up 2.4% from the prior-year period. Its adjusted pre-tax earnings came in at $8.17 billion for the quarter, indicating a 5.1% year-over-year improvement.
While its adjusted net earnings increased 4.3% year-over-year to $6.91 billion, its adjusted EPS rose 4.4% to $2.59. As of July 3, 2022, the company had $10.98 billion in cash and cash equivalents.
Analysts expect an EPS of $10.07 for fiscal 2022 ending December 31, 2022, indicating a rise of 2.8% from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
The consensus revenue estimate of $95.15 billion for the same fiscal year represents a 1.5% year-over-year improvement. Its EPS is expected to grow at a rate of 4.1% per annum over the next five years.
Its 68% trailing-12-month gross profit margin is 24.2% higher than the 54.7% industry average. The company’s trailing-12-month EBIT margin of 26.4% is significantly higher than the industry average of 0.2%.
The stock’s 16.17x non-GAAP forward P/E is 14.6% lower than the 18.93x industry average. In terms of forward EV/EBIT, JNJ is trading at 14.11x, 16.2% lower than the 16.84x industry average.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Stability and a B grade for Growth, Value, Sentiment, and Quality. Click here to see the additional ratings for JNJ’s Momentum.
JNJ is ranked #1 of 167 stocks in the Medical – Pharmaceuticals industry.
Pfizer Inc. (PFE)
PFE is a pharmaceutical company that offers medicines, vaccines, medical devices, and consumer healthcare products worldwide for oncology, inflammation, cardiovascular, and other therapeutic areas. It serves wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, individual provider offices, and disease control and prevention centers.
PFE will pay a $0.40 quarterly cash dividend on September 9, 2022. The stock pays a $1.60 per share dividend annually, translating to a 5.9% yield. The company’s dividend has grown at a 3.5% rate over the past five years. PFE has increased its dividends for 11 consecutive years.
On August 25, 2022, PFE announced positive top-line data from the Phase 3 clinical trial RENOIR investigating its bivalent RSV prefusion F vaccine candidate, RSVpreF, when administered to adults above 60 years, to optimize protection against RSV A and B strains. This positive result enabled PFE to look at the more severe disease primary endpoint of LRTI-RSV defined by three or more symptoms, where vaccine efficacy of 85.7% was observed.
Based on the findings of this pre-planned interim efficacy analysis, PFE intends to submit a Biologics License Application (BLA) to the U.S. Food and Drug Administration (FDA) this fall.
PFE’s revenues for its fiscal 2022 second quarter ended July 3, 2022, increased 46.8% year-over-year to $27.74 billion. The company’s income from operations came in at $9.88 billion for the quarter, up 69.6% from the year-ago period.
Its adjusted net income came in at $11.66 billion, indicating a 93.5% rise from the prior-year period. PFE’s adjusted EPS increased 92.5% year-over-year to $2.04. The company had $1.78 billion in cash and cash equivalents as of July 3, 2022.
The consensus EPS estimate of $6.49 for fiscal 2022 ending December 31, 2022, represents a 46.9% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenue to be $101.65 billion for the same fiscal year, representing a 25.1% rise from the prior-year period.
Its 62.8% trailing-12-month gross profit margin is 14.7% higher than the 54.7% industry average. The company’s trailing-12-month EBIT margin of 38.1% is 22022.6% higher than the industry average of 0.2%.
The stock’s 7.12x non-GAAP forward P/E is 62.4% lower than the 18.93x industry average. In terms of forward EV/EBIT, PFE is trading at 6.46x, 61.7% lower than the 16.84x industry average.
PFE’s POWR Ratings reflect this promising outlook. It has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B grade for Quality. Click here to see the additional ratings for PFE’s Growth, Momentum, Stability, and Sentiment.
PFE is ranked #10 of 167 stocks in the same industry.
Want More Great Investing Ideas?
JNJ shares were trading at $162.43 per share on Tuesday afternoon, down $0.57 (-0.35%). Year-to-date, JNJ has declined -3.18%, versus a -15.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|JNJ||Get Rating||Get Rating||Get Rating|
|PFE||Get Rating||Get Rating||Get Rating|