The COVID-19 pandemic has accelerated drug manufacturing companies’ revenues this year. Overall pharmaceutical sales are expected to increase by 4.6% next year. In addition, with the emergence of the omicron coronavirus variant, the demand for vaccines and other precautionary medicines should remain high.
Several trends in the pharmaceutical manufacturing industry, such as the addition of e-pharmacy, AI partners, and biosimilar market expansion, are expected to drive the drug manufacturing market next year. Also, as drug manufacturers tend to raise the prices of their medications every year, their revenues should increase next year.
Given this backdrop, along with rising inflation and expected market volatility due to omicron variant concerns, we think it could be wise to bet on dividend-paying drug manufacturing stocks Novo Nordisk A/S (NVO), Novartis AG (NVS), Merck & Co., Inc. (MRK), and Bristol-Myers Squibb Company (BMY).
Novo Nordisk A/S (NVO)
Headquartered in Bagsvaerd, Denmark, NVO is a global health company that operates in two segments—Diabetes and Obesity care; and Biopharm. NovoLog/NovoRapid, NovoLog Mix/NovoMix, Norditropin, and Vagifem are a few of the company’s products. NVO markets its products in more than 180 countries, and its regional structure consists of two commercial units: North America and International Operations.
The company paid a $0.55 semiannual dividend on August 25. NVO’s annual $1.10 dividend yields 0.99% at its current price. Its dividend has grown 0.9% over the past five years.
This month, NVO planned to invest more than DKK17 billion ($2.59 billion) to construct three new manufacturing facilities and expand one existing facility at its production site in Kalundborg, Denmark. The company believes that the investment will establish additional capacity across the entire global value chain, from manufacturing active pharmaceutical ingredients (API) to assembly and packaging.
NVO’s net sales for the third quarter, ended September 30, 2021, increased 15.2% year-over-year to DKK35.62 billion ($5.42 billion). The company’s gross profit grew 14.7% from its year-ago value to DKK29.56 billion ($4.5 billion). Its operating profit rose 19.1% from the prior-year quarter to DKK15.25 billion ($2.32 billion). Also, the company’s net profit increased 17.7% year-over-year to DKK12.12 billion ($1.84 billion).
Analysts expect NVO’s revenue for its fiscal year 2022 to be $22.82 billion, representing a 6.5% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to grow 10.8% in the current year. Its stock price has increased 64.7% over the past nine months.
NVO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Quality and a B grade for Stability and Value. We have also graded NVO for Sentiment, Growth, and Momentum. Click here to access all NVO’s ratings. NVO is ranked #7 of 193 stocks in the Medical – Pharmaceuticals industry.
Novartis AG (NVS)
NVS is a pharmaceutical company headquartered in Basel, Switzerland. The company operates through two segments: Innovative Medicines; and Sandoz. NVS’ segments provide ophthalmology, neuroscience, immunology, cardiovascular, and other medical products. Also, it offers active ingredients and finished dosage forms of small molecule pharmaceuticals to third parties across a range of therapeutic areas.
NVS paid a $3.2 annual dividend on March 15. The stock distributes a $3.20 dividend annually, which translates to a yield of 3.65%. The company’s dividend has grown at a rate of 3.3% over the past five years.
This month, the U.S. Food and Drug Administration (FDA) has approved NVS’ Cosentyx for the treatment of active enthesitis-related arthritis (ERA) in individuals four years and older, and of active juvenile psoriatic arthritis (JPsA) in patients two years and older. NVS believes that this approval should bring positive news for some patients who struggle with painful symptoms like the inflammation of the joints and swollen fingers and toes.
During the third quarter, ended September 30, 2021, NVS’ net sales increased 6.3% year-over-year to $13.03 billion. The company’s operating income grew 34% from its year-ago value to $3.23 billion. Its net income rose 42.8% from the prior-year quarter to $2.76 billion. Also, the company’s EPS increased 44.7% year-over-year to $1.23.
NVS’ revenue is expected to increase 3.7% year-over-year to $54.12 billion in its fiscal 2022. The company’s EPS is expected to increase 9.9% in the current year. Furthermore, the stock has gained 8.6% in price over the past month.
NVS’ POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has an A grade for Stability and a B grade for Quality and Growth.
Merck & Co., Inc. (MRK)
MRK is a Kenilworth, N.J.-based global healthcare company that operates through Pharmaceutical and Animal Health segments. The company’s segments offer human health pharmaceutical products in the areas of oncology, immunology, neuroscience, virology, cardiovascular, diabetes, and women’s health, as well as vaccine products. In addition, it discovers, develops, manufactures, and markets veterinary pharmaceuticals, vaccines, and health management solutions.
MRK paid a $0.69 quarterly dividend on December 15. The stock distributes a $2.76 dividend annually, translating to a 3.6% yield. The company’s dividend has grown by 8.2% over the past five years.
This month, MRK announced that Japan’s Ministry of Health, Labor, and Welfare had granted Special Approval for Emergency in Japan for molnupiravir, an investigational oral antiviral medicine for infectious diseases caused by SARS-CoV-2. According to the company, molnupiravir should be a critical addition to the measures available to help curb the impact of COVID-19 on patients, healthcare systems, and public health in Japan.
MRK’s total sales increased 20.4% year-over-year to $13.15 billion for the third quarter, ended September 30, 2021. The company’s EPS grew 27.7% from its year-ago value to $1.75. Its net income rose 27.3% from the prior-year quarter to $4.44 billion.
For the fiscal year 2022, analysts expect MRK’s revenue to increase 15.6% year-over-year to $56.29 billion. The company’s EPS is estimated to increase 27.4% in the current year. The stock has gained 4.4% in price over the past three months.
It is no surprise that MRK has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Growth and a B grade for Value and Quality.
Bristol-Myers Squibb Company (BMY)
BMY is a global biopharmaceutical company that discovers, develops, and delivers medicines for serious diseases. The New York City-based company’s pharmaceutical products include chemically synthesized drugs or small molecules, and products produced from biological processes, called biologics. In addition, it offers Revlimid, Abraxane, Reblozyl, Inrebic, Onureg, and other products, including a range of treatments for oncology, immunology, cardiovascular, and fibrosis.
On December 13, the company approved a $0.54 quarterly dividend, payable on February 1, 2022. The company’s $2.16 annual dividend yields 3.47% at its current stock price. Its dividend has grown 5.2% over the past five years.
This month, BMY announced that Orencia, one of its therapies, has been approved by the U.S. Food and Drug Administration (FDA) for the prevention of acute graft versus host disease in adults and pediatric patients two years of age and older who are undergoing hematopoietic stem cell transplantation (HSCT). The company believes that with Orencia, BMY has drawn on its legacy and expertise in immunology and hematology to deliver an important treatment option for patients with a high-need disease.
BMY’s net product sales for the third quarter, ended September 30, 2021, increased 10.3% year-over-year to $11.24 billion. The company’s total revenues grew 10.3% from its year-ago value to $11.62 billion. Its net earnings came in at $1.55 billion. Also, the company’s EPS amounted to $0.69.
Analysts expect BMY’s revenue for its fiscal year 2022 to be $47.83 billion, representing 2.8% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Also, its EPS is expected to grow 16.5% in the current year. Its stock price has increased 10.2% over the past month.
BMY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Value and a B grade for Quality and Growth. We have also graded BMY for Sentiment, Momentum, and Stability. Click here to access all BMY’s ratings. BMY is ranked #12 in the Medical – Pharmaceuticals industry.
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NVO shares were trading at $110.67 per share on Tuesday morning, down $0.96 (-0.86%). Year-to-date, NVO has gained 60.62%, versus a 29.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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