3 Healthcare Stocks to Buy for the Long Run

NYSE: PFE | Pfizer Inc. News, Ratings, and Charts

PFE – The healthcare industry has achieved significant growth over the past two years in-part because the COVID-19 pandemic fostered a stream of hefty private and federal investments in the sector. With accelerating advancement and increased tech integration in healthcare, we expect renowned companies Pfizer Inc. (PFE), Merck & Co., Inc. (MRK), and AmerisourceBergen Corporation (ABC) to grow significantly in the long run. Let’s discuss.

The healthcare industry has been in the limelight since the onset of the COVID-19 pandemic and has remained under pressure as variants of the virus have emerged several times over the past two years. Medical experts and the CDC are now warning about a potential fourth wave as cases rise again in China and several European countries.

Biotech companies and governments have invested heavily to control the pandemic, including significant investments to create effective vaccines for all ages and to fund mass vaccination drives. 

Furthermore, increased health awareness, an aging population, and rising chronic disease cases due to remote lifestyles are expected to boost healthcare spending over the long term. The global consumer healthcare market is expected to grow at an 8.6% CAGR to $6.65 trillion through 2028.

Given this backdrop, we think quality healthcare stocks Pfizer Inc. (PFE), Merck & Co., Inc. (MRK), and AmerisourceBergen Corporation (ABC) could be ideal investments bets now.

Click here to checkout our Healthcare Sector Report for 2022

Pfizer Inc. (PFE)

New York City-based PFE discovers, develops, manufactures, markets, and distributes biopharmaceutical products globally. Its portfolio includes medicines and vaccines that are served to wholesalers, retailers, healthcare providers, government agencies, pharmacies, and local communities.

On March 24, PFE obtained FDA Breakthrough Therapy Designation for its respiratory syncytial virus vaccine candidate to prevent RSV in older adults. This federal approval should accelerate the development and commercialization of PFE’s RSV vaccine candidate.

On March 11, PFE acquired Arena Pharmaceuticals. The acquisition should accelerate the development of etrasimod to treat immune-inflammatory diseases, further expanding PFE’s product pipeline.

On March 11, PFE announced its plan to submit data to the FDA for a fourth COVID-19 shot and shared the update of the new vaccine trials that might protect against all coronavirus variants.      

PFE’s revenue increased 105% year-over-year to $23.84 billion in its fiscal fourth quarter (ended December 31). Its net income grew 300.6% from its year-ago value to $3.39 billion, while its income from continuing operations improved 464.4% year-over-year to $3.58 billion over the period. The company’s non-GAAP EPS has increased 151.2% from its year-ago value to $1.08.

The $1.63 consensus EPS estimate for its fiscal first quarter (ending March 2022) represents a 75.7% improvement year-over-year. The $25.19 billion consensus revenue estimate for the current quarter indicates a 72.7% increase from the same period last year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 47% in price to close its last trading day at $53.28.

PFE’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which 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 a B grade for Value, Growth, Sentiment, and Quality. Among the 175 stocks in the Medical – Pharmaceuticals industry, it is ranked #7. Click here to see the additional POWR ratings of PFE for Momentum and Stability.

Merck & Co., Inc. (MRK)

MRK in Kenilworth, N.J., 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 and retailers, hospitals, government agencies, and other health care providers.

On March 25, MRK received a positive opinion from EU CHMP for KEYTRUDA for patients with microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) tumors in five distinct types of cancer. This positive opinion reflects MRK’s advancement in the development of cancer treatments.

On March 21, MRK’s KEYTRUDA also received approval from the FDA based on the KEYNOTE-158 trial. This should strengthen the role of KEYTRUDA in treating patients with advanced endometrial cancer.

And on March 2, WHO recommended MRK’s COVID-19 antiviral pill (molnupiravir) for high-risk patients, such as those with immunocompromised, the unvaccinated, older people, and those with chronic diseases.

During the fourth quarter, ended Dec. 31, 2021, MRK’s net sales increased 24% year-over-year to $13.52 billion. The company’s non-GAAP net income increased 84% year-over-year to $4.58 billion, while its non-GAAP EPS grew 84% from the prior-year quarter to $1.80.

Analysts expect MRK’s revenues to increase 19.1% year-over-year to $14.39 billion in its fiscal first quarter (ending March 2022). Its EPS is expected to increase 27.8% to $1.79 in the current quarter. Shares of MRK have gained 10.8% in price over the past six months.

MRK’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. MRK also has a B grade for Value, Growth, Sentiment, Quality, and Stability. The stock is ranked #3 of 175 stocks in the Medical – Pharmaceuticals industry.

In addition to the POWR Ratings I have just highlighted, click here to see the MRK ratings for Momentum.

AmerisourceBergen Corporation (ABC)

ABC is a global distributor of pharmaceutical products. The Chesterbrook, Pa.-based company operates through two segments: U.S. Healthcare Solutions; and International Healthcare Solutions. It also offers pharmacy management, staffing, and other consulting services and distributes plasma and other blood products, injectable pharmaceuticals, vaccines, and other specialty products to health care providers.

In December, Innomar Strategies, a part of ABC, agreed with the Government of Canada to support the distribution of COVID-19 vaccines across the country. World Courier, a wholly-owned subsidiary of ABC, plays a vital role in distribution globally from South Africa to Germany, Finland, Sweden, and Norway.

On February 10, ABC announced an extended five-year agreement with Cancer Specialists of North Florida for the continued support of technology, analytics, and specialty drug distribution services. This extended strategic relationship should position ABC at the forefront of the race to develop effective cancer treatments.

In its fiscal year 2022 first quarter (ended December 31, 2021), ABC’s net revenue increased 13.5% year-over-year to $59.63 billion. Its non-GAAP operating income rose 21.4% from the year-ago value to $749.15 million, while its net income grew 18.7% to $449.42 million. The company’s non-GAAP EPS increased 18.3% from the year-ago value to $2.58.

For its fiscal second-quarter, ending March 31, 2022, ABC’s EPS and revenue are expected to increase 14.8% and 16.4%, respectively, year-over-year to $2.90 and $57.19 billion. It surpassed consensus EPS estimates in each of the trailing four quarters.

The stock has gained 30.3% in price over the past year to close the last trading session at $154.73.

ABC’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. It has a B grade for Growth, Value, Stability, and Sentiment. It is ranked #11  of 84 stocks within the Medical – Services industry.

To see the other ratings of ABC for Momentum and Quality, click here.

Click here to checkout our Healthcare Sector Report for 2022

PFE shares were trading at $52.93 per share on Tuesday afternoon, down $0.35 (-0.66%). Year-to-date, PFE has declined -9.68%, versus a -3.12% 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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