Because the COVID-19 pandemic is under control in most major economies, the hype surrounding vaccine producers is gradually tapering off. However, because the population of much of the world, including the United States, is aging, the demand for pharmaceutical products is on the rise. An increasing patient pool with various chronic diseases, and continued treatment innovations for critical diseases, should keep driving the industry’s growth this year and beyond. According to a report by Research and Markets, the global pharmaceuticals market is expected to grow at an 8% CAGR from 2021 – 2025.
Investors’ interest in the pharmaceutical space is evident in the SPDR S&P Pharmaceuticals ETF’s (XPH) 4.6% returns over the past month versus the SPDR S&P 500 Trust ETF’s (SPY) 1.3% gains over this period.
With these factors in mind, we think it could be wise to bet on the shares of established pharmaceutical companies Johnson & Johnson (JNJ) and Pfizer Inc. (PFE). They have significant market dominance and are innovating at a rapid pace. But while these stocks are still trading at high prices, one should seek to buy them on every dip.
Johnson & Johnson (JNJ)
One of the top players in the healthcare space, JNJ researches, develops, manufactures and sells a range of products in the healthcare field worldwide. It operates through three segments: consumer health, pharmaceutical, and medical devices, and is especially known for its baby care products.
The company announced on May 6 that the FDA had approved TECNIS Synergy and TECNIS Synergy Toric II IOLs, and that Health Canada also approved TECNIS Synergy Toric II IOLs. Because the product enables surgeons to address astigmatism during surgery, it could see increasing demand for it in the coming months.
JNJ’s sales increased 7.9% year-over-year to $22.32 billion for its fiscal first quarter, ended March 31, 2021. Its gross profit grew 12% year-over-year to $15.26 billion, while its adjusted net earnings increased 12.5% year-over-year to $6.90 billion. Also, JNJ’s adjusted EPS increased 12.6% year-over-year to $2.59.
For the current quarter ending June 30, 2021, analysts expect JNJ’s EPS and revenue to increase 35.3% and 26%, respectively, year-over-year to $2.26 and $22.19 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 13.9% over the past year to close yesterday’s trading session at $163.84. It is currently trading nearly 6% below its 52-week high of $173.65, which it hit on January 26, 2021.
JNJ’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Stability, and a B grade for Quality, Value, Growth, and Sentiment. Within the Medical – Pharmaceuticals industry, JNJ is ranked #1 of 227 stocks. To see JNJ’s rating for Momentum as well, click here.
Pfizer Inc. (PFE)
PFE discovers, develops, markets, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas and is involved in the contract manufacturing business. The company has collaboration agreements with Bristol-Myers Squibb Company (BMY), Astellas Pharma, Inc. (ALPMY), Myovant Sciences Ltd. (MYOV), and BioNTech SE (BNTX).
PFE’s revenue surged 45% year-over-year to $14.58 billion for its fiscal first quarter, ended April 4, 2021. Its income from continuing operations grew 96% year-over-year to $4.88 billion. Its adjusted Income came in at $5.26 billion, which represents a 48% year-over-year increase. The company’s adjusted EPS was $0.93, up 47%% year-over-year.
This month, PFE announced that the U.S. Food and Drug Administration (FDA) had approved PREVNAR 20 for the prevention of invasive disease and pneumonia in adults ages 18 years and older. Nanette Cocero, Global President of Pfizer Vaccines said, “We are thrilled with this approval as it furthers our mission to expand protection against disease-causing bacteria serotypes.”
Analysts expect PFE’s EPS and revenue to increase 71.6% and 77.9%, respectively, year-over-year to $3.81 and $74.55 billion in its fiscal year 2021. It surpassed consensus EPS estimates in three of the trailing four quarters. The stock has appreciated 17.9% over the past year to close yesterday’s trading session at $39.42. It is currently trading 9.3% below its 52-week high of $43.08, which it hit on December 9, 2020.
PFE’s POWR Ratings reflect solid prospects. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system. It has a B grade for Quality, Value, Growth, Stability, and Sentiment.
To see the additional POWR Ratings for PFE (Momentum), click here. It is ranked #3 in the same industry.
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JNJ shares were trading at $163.89 per share on Tuesday morning, up $0.05 (+0.03%). Year-to-date, JNJ has gained 5.44%, versus a 13.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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