London-based biopharmaceutical company AstraZeneca PLC (AZN) develops and commercializes prescription medicines in oncology, cardiovascular, renal and metabolism, respiratory, infection, neuroscience, and autoimmunity. AZN’s recently launched EVUSHELD, a long-acting antibody combination for preventing COVID-19 in immunocompromised populations, is gaining popularity worldwide. Furthermore, impressive Phase III trial results for AZN’s Lynparza helped the stock soar in price lately. In addition, a $0.10 dividend hike for the first time in a decade and a high sales forecast for 2022 are attracting investor attention.
However, despite seeing healthy demand for COVID-19 vaccines, while major pharmaceutical companies delivered stellar earnings in the 2021 fourth quarter, AZN has faced significant operating and net losses. Consequently, analysts do not expect AZN’s earnings to improve significantly for the current quarter. But surging investments in R&D, growing demand for COVID-19 vaccines with the emergence of new variants, and a rising need for drugs to treat various rare and chronic diseases should continue to drive the pharmaceutical industry’s growth. Along with the industry’s solid growth prospects, the defensive nature of pharma stocks is fostering significant investor attention amid the current market volatility.
Investors’ interest in this space is evidenced by the VanEck Vectors Pharmaceutical ETF’s (PPH) 1.4% gains over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) negative returns. The global pharmaceutical manufacturing market is expected to grow at an 11.3% CAGR to $957.59 billion by 2028. Given this backdrop, we think it could be wise to bet on Johnson & Johnson (JNJ), Pfizer Inc. (PFE), AbbVie Inc. (ABBV), and Eli Lilly and Company (LLY), which are well-positioned to outperform AZN in the upcoming months.
Johnson & Johnson (JNJ)
JNJ in New Brunswick, N.J. develops, manufactures, and sells health care products, and provides related services. The company serves primarily the consumer, pharmaceutical, and medical devices and diagnostics markets and distributes its products through retail outlets and distributors, wholesalers, hospitals, and health care professionals for prescription use.
On Feb.14, 2022, JNJ’s Janssen Pharmaceutical Companies announced new real-world evidence data showing the initiation of ERLEADA results in high rates of rapid and deep prostate-specific antigen (PSA) response among patients with metastatic castration-sensitive prostate cancer (mCSPC). Rapid and deep PSA responses with ERLEADA from Phase 3 SPARTAN and TITAN studies were associated with improved patient-reported outcomes (PROs) related to the quality of life, physical wellbeing, pain, and fatigue intensity. ERLEADA should witness wide recognition across the industry in the coming months.
For its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, JNJ’s sales were $24.80 billion, representing a 10.4% year-over-year improvement. The company’s gross profit was $16.85 billion, up 14.9% from the prior-year period. Its pre-tax income came in at $4.74 billion for the quarter, indicating a 193.6% year-over-year improvement. While its adjusted net earnings increased 14.4% year-over-year to $5.68 billion, its adjusted EPS rose 14.5% to $2.13. The company had $36.22 billion in cash and cash equivalents as of Dec. 31, 2021.
The $10.52 consensus EPS estimate for its fiscal 2022, ending Dec. 31, 2022, represents a 7.3% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenue to rise 6.2% year-over-year to $99.58 billion for the same fiscal year. JNJ’s EPS is expected to grow at a 6.4% rate per annum over the next five years. Over the past year, the stock has gained marginally in price and closed yesterday’s trading session at $167.31.
JNJ’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Stability and a B grade for Value, Quality, and Sentiment. Click here to see the additional ratings for JNJ’s Growth and Momentum. JNJ is ranked #2 of 181 stocks in the Medical – Pharmaceuticals industry.
Pfizer Inc. (PFE)
New York City’s 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.
On Feb.15, 2022, PFE and OPKO Health, Inc. (OPK), a medical test and medication company focused on diagnostics and pharmaceuticals, announced that the European Commission has granted marketing authorization for the next-generation long-acting recombinant human growth hormone NGENLA, a once-weekly injection to treat children and adolescents with growth hormone deficiency (GHD). This new, longer-acting option significantly reduces the usual treatment burden from once-daily to once-weekly injections and should witness great demand in the coming months.
For its fiscal 2021 fourth quarter, ended Dec. 31, 2021, PFE’s revenues increased 1049% year-over-year to $23.84 billion. The company’s income from continuing operations came in at $3.58 billion for the quarter, indicating a 464.4% year-over-year improvement. PFE’s non-GAAP net income was $6.24 billion, representing a 156.3% rise from the prior-year period. Its non-GAAP EPS increased 151.2% year-over-year to $1.08.
The $65.12 consensus EPS estimate for fiscal 2022, ending Dec. 31, 2022, indicates a 58.4% year-over-year improvement. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenue to reach $997.72 billion for the same fiscal year, representing a 31.9% rise from the prior-year period. The company’s EPS is expected to grow at a 102.3% rate per annum over the next five years. The stock has gained 43.4% in price over the past year and ended yesterday’s trading session at $49.79.
PFE’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.
It has an A grade for Value and a B grade for Growth, Sentiment, and Quality. Click here to see the additional ratings for PFE (Momentum and Stability). PFE is ranked #13 in the Medical – Pharmaceuticals industry.
AbbVie Inc. (ABBV)
ABBV develops, manufactures, and sells a range of pharmaceutical products. The North Chicago, Ill.-based company’s products are focused on treating diseases related to immunology, oncology, virology, neuroscience, eye care, women’s health, gastroenterology, and other serious health conditions.
On Feb. 8, 2022, ABBV’s Allergan Aesthetics company reported that the FDA had approved f JUVÉDERM VOLBELLA XC to improve infraorbital hollows in adults over the age of 21, after clinical trial data showed 90% of subjects reporting satisfaction one year after treatment. As the eye area, including the undereye hollow, remains a top concern among patients, this FDA approval for JUVÉDERM VOLBELLA XC should generate high demand in the near term.
ABBV’s net revenues for its fiscal 2021 fourth quarter, ended Dec. 31, 2021, came in at $14.89 billion, representing a 7.4% rise from the prior-year period. The company’s operating earnings were $5.07 billion, indicating a 35.2% year-over-year improvement. Its non-GAAP net income came in at $5.92 billion for the quarter, representing a 13.3% rise from the prior-year period. And ABBV’s adjusted EPS increased 13.4% year-over-year to $3.31.
Analysts expect its EPS to increase 11.5% year-over-year to $14.16 for its fiscal year 2022, ending Dec. 31, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. The $60.31 billion consensus revenue estimate for the same fiscal year represents a 7.5% rise from the prior-year period. The company’s EPS is expected to grow at a 4.1% rate per annum over the next five years. And over the past year, the stock has gained 38.6% in price to close yesterday’s trading session at $144.76.
ABBV’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has a B grade for Value, Stability, Sentiment, and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for ABBV’s Growth and Momentum here. ABBV is ranked #7 in the Medical – Pharmaceuticals industry.
Eli Lilly and Company (LLY)
LLY develops and markets pharmaceutical products for humans and animals worldwide. The Indianapolis, Ind.-based company’s products are focused on diabetes, oncology, immunology, neuroscience, and other therapies.
On Feb. 11, 2022, the FDA issued an Emergency Use Authorization (EUA) for Bebtelovimab, an antibody that demonstrates neutralization against the omicron variant. Bebtelovimab can treat mild-to-moderate COVID-19 in adults and pediatric patients with positive results of direct SARS-CoV-2 viral testing. This EUA is expected to receive high demand in the coming months.
For its fiscal 2021 fourth quarter, ended Dec. 31, 2021, LLY’s revenue increased 7.5% year-over-year to $8 billion. The company’s non-GAAP net income increased 7.6% year-over-year to $2.27 billion. And its non-GAAP EPS came in at $2.49, up 7.8% from the year-ago period.
Analysts expect its EPS to rise 5.3% year-over-year to $7.60 for its fiscal year 2022, ending Dec. 31, 2022. LLY’s EPS is expected to grow at a 6.2% rate per annum over the next five years. Over the past year, the stock has gained 17.6% in price and ended yesterday’s session at $243.84.
LLY’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.
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JNJ shares were trading at $166.49 per share on Wednesday morning, down $0.82 (-0.49%). Year-to-date, JNJ has declined -2.68%, versus a -6.64% 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...
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