Since the beginning of the year, recession fears have gripped the stock market. Bank of America’s Global Fund Manager survey for August found that 58% of investors expect a downturn in the coming 12 months.
Investors foresee consumers tightening their purse strings because of the persistently high inflation. However, medicine is something that consumers cannot forgo spending on to save money. Pharmaceutical companies are expected to benefit from the rapidly aging population and the rising chronic diseases.
The innovative ways of treating and preventing major life-threatening diseases should drive the pharma industry’s growth. According to Facts and Factors, the global pharmaceutical market size is expected to hit $2067.36 million by 2028, growing at a CAGR of 5.7%.
Pfizer Inc. (PFE) and Merck & Co., Inc. (MRK) have been consistently growing their drug portfolios and are well-positioned to keep doing well regardless of the economic headwinds. So, these stocks could be ideal additions to your portfolio.
Pfizer Inc. (PFE)
PFE specializes in biopharmaceutical products globally. Its portfolio includes medicines and vaccines served to wholesalers, retailers, healthcare providers, government agencies, pharmacies, and local communities.
On August 8, 2022, PFE announced the acquisition of Global Blood Therapeutics, Inc. (GBT) to enhance its presence in rare hematology. This acquisition is expected to drive the company’s growth by combining sickle cell disease expertise, portfolio, and pipeline, potentially generating more than $3 billion in revenue.
PFE’s revenue increased 46.8% year-over-year to $27.74 billion in the fiscal second quarter (ended July 3, 2022). Its non-GAAP net income grew 93.5% from the year-ago value to $11.65 billion, while its income from continuing operations improved 69.5% year-over-year to $9.88 billion. The company’s non-GAAP EPS increased 92.4% from the year-ago value to $2.04.
The consensus EPS estimate of $1.50 for its fiscal third quarter (ending September 2022) represents a 12.2% improvement year-over-year. The consensus revenue estimate of $24.64 billion for the quarter ending December 31, 2022, indicates a 3.4% increase from the year-ago quarter. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has gained marginally to close its last trading day at $49.27.
PFE’s POWR Ratings reflect this promising outlook. The company’s overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Value and a B for Quality. Among the 169 stocks in the Medical – Pharmaceuticals industry, it is ranked #10. Click here to see the additional POWR Ratings of PFE for Growth, Momentum, Stability, and Sentiment.
Merck & Co., Inc. (MRK)
MRK is a global provider of health solutions through its prescription medicines, vaccines, biological therapies, and animal health products. The company operates through two segments: Pharmaceutical and Animal Health. It offers its products to drug wholesalers, retailers, hospitals, government agencies, and other health care providers.
On August 16, 2022, MRK and Orna Therapeutics collaborated on developing and commercializing vaccines and therapeutics in infectious disease and oncology areas. “This broad strategic collaboration brings together Merck’s significant expertise in nucleic acid biology, clinical development, and manufacturing with Orna’s compelling circular RNA technology to explore the opportunity to develop a new generation of potential vaccines and therapeutics,” said Fiona Marshall, senior vice president at Merck Research Laboratories.
During the second quarter ended June 30, 2022, MRK’s net sales increased 28% year-over-year to $14.59 billion. The company’s non-GAAP net income from continuing operations increased 204.2% year-over-year to $4.74 billion, while its non-GAAP EPS grew 206.5% from the prior-year quarter to $1.87.
Analysts expect MRK’s revenues to increase 6.6% year-over-year to $14.02 billion in the fiscal third quarter (ending September 30, 2022). Its EPS is expected to increase marginally to $1.76 in the current quarter. MRK surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of MRK have gained 19.2% over the past six months to close the last trading day at $91.04.
MRK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. MRK has a B grade for Growth, Value, Sentiment, and Quality. The stock is ranked #3 in the same industry.
In addition to the POWR Rating grades I have just highlighted, click here to see MRK’s rating for Momentum and Stability.
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PFE shares were trading at $48.57 per share on Thursday afternoon, down $0.70 (-1.42%). Year-to-date, PFE has declined -15.80%, versus a -9.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...
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