Amid widespread macro headwinds, recession odds are increasing. However, Goldman Sachs Group (GS) expects the United States to avoid a recession. According to the bank, the ratio of household net worth to disposable income is at a record high, the personal savings rate is amplified, pent-up savings are ample, and Americans overall have a healthy financial surplus.
Moreover, the medical industry has relatively inelastic demand helping it to survive recessionary pressures. People continue to spend on drugs and health care regardless of market uncertainties. So, investing in medical stocks is a way for investors to hedge against recession risks.
Furthermore, the global drug formulation market is projected to grow at a CAGR of 5.6% from 2022 to 2032, which is expected to bode well for the overall medical industry. Also, national healthcare spending is projected to grow at an average annual rate of 5.4% to reach $6.20 trillion by 2028.
Given the backdrop, fundamentally sound medical stocks Pfizer Inc. (PFE) and Bristol-Myers Squibb Company (BMY), which pay reliable dividends, could be ideal buys now.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. The company serves wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, individual provider offices, and disease control and prevention centers.
On December 14, 2022, PFE and China Meheco Group Co Ltd. (China Meheco) signed an agreement. In response to a sharp increase in COVID patients, China Meheco will import and offer PFE’s oral COVID-19 therapy Paxlovid in mainland China. This agreement should increase PFE’s revenue.
Also, on December 8, 2022, PFE and BioNTech SE (BNTX) achieved the U.S. Food and Drug Administration’s Emergency Use Authorization for their Omicron BA.4/BA.5-adapted bivalent COVID-19 vaccine. This marks a significant achievement for the companies’ covid portfolio.
PFE has paid dividends for 33 consecutive years. Over the last three years, PFE’s dividend payouts have grown at a 5.5% CAGR. While PFE’s four-year average dividend yield is 3.63%, and its current dividend translates to a 3.19% yield.
PFE’s income from continuing operations came in at $8.65 billion for the third quarter that ended October 2, 2022, up 5.8% year-over-year. Its net income came in at $8.61 billion, up 5.7% year-over-year, while its EPS came in at $1.51, up 6.3% year-over-year.
Analysts expect PFE’s revenue to increase 23.3% year-over-year to $100.24 billion in 2022. The stock’s EPS is estimated to grow 46.4% year-over-year to $6.47 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past three months, the stock has gained 11.7% to close the last trading session at $51.36.
PFE’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PFE has an A grade for Value and a B for Growth, Sentiment, and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #2 out of 159 stocks. Click here for the additional POWR Ratings for Momentum and Stability for PFE.
Bristol-Myers Squibb Company (BMY)
BMY engages in the global discovery, development, licensing, manufacture, and sale of biopharmaceutical products. The Company’s offerings include products for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.
On November 29, 2022, BMY and Envisagenics, an Artificial Intelligence -driven biotechnology company, announced their research collaboration agreement. Under the agreement, Envisagenics’ SpliceCore® AI platform will enhance BMY’s oncology portfolio.
On November 10, 2022, BMY announced Health Canada’s approval of CAMZYOSTM (mavacamten capsules) for treating symptomatic obstructive hypertrophic cardiomyopathy. This marks yet another milestone achievement for the company.
BMY has paid dividends for 33 consecutive years. Over the last three years, BMY’s dividend payouts have grown at 9.6% CAGR. While BMY’s four-year average dividend yield is 3.03%, its current dividend translates to a 3.10% yield.
BMY’s total expenses came in at $9.01 billion for the third quarter that ended September 30, 2022, down 4.8% year-over-year. Moreover, its net earnings came in at $1.61 billion, up 3.9% year-over-year. Its EPS came in at $0.75, up 8.7% year-over-year.
BMY’s revenue is expected to increase by 2.7% year-over-year to $47.11 billion in 2023. Its EPS is expected to grow 4.5% year-over-year to $7.95 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 18.2% to close the last trading session at $73.16.
BMY has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade Value and a B for Quality, Stability, and Sentiment. It is ranked #3 in the same industry.
Beyond what is stated above, we’ve also rated BMY for Growth and Momentum. Get all BMY ratings here.
PFE shares were trading at $51.43 per share on Tuesday afternoon, up $0.07 (+0.14%). Year-to-date, PFE has declined -10.08%, versus a -18.72% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
2 Medical Stocks to Buy Now With Hefty Yields StockNews.com
