An aging population, increasing prevalence of chronic diseases, the emergence of advanced drugs, and surging investments in R&D should drive the pharmaceutical industry’s growth. The pharmaceutical market is expected to grow at a 5.9% CAGR to $1.40 trillion by 2026.
Amid the uncertainties surrounding the stock market, the inelastic demand for pharma products makes the industry investor favorite. While fundamentally sound pharma stocks could help survive the market volatility and generate stable returns in the near term, these stocks could help generate solid long-term returns given the industry’s growth prospects.
Broad market reach and diversified product portfolios should help prominent pharma stocks Johnson & Johnson (JNJ) and Bristol-Myers Squibb Company (BMY) beat the market. Along with price appreciation, their impressive dividend payouts should help generate solid total returns for investors in the long run.
Johnson & Johnson (JNJ)
JNJ develops, manufactures, sells health care products, and provides related services. It primarily serves the consumer, pharmaceutical, and medical devices and diagnostics markets and distributes its products through retail outlets and distributors, wholesalers, hospitals, and health care professionals for prescription use. It has a 0.59 beta.
JNJ will pay a $1.13 quarterly cash dividend on September 6, 2022. The stock pays a $4.52 per share dividend annually, translating to a 2.72% yield. The company’s dividend has grown at a 5.9% rate over the past five years. JNJ has increased its dividends for 59 consecutive years.
On August 4, 2022, the European Commission granted marketing authorization for the expanded use of JNJ’s Janssen Pharmaceuticals’ IMBRUVICA in an all-oral, fixed-duration (FD) treatment combination with venetoclax (I+V) for adults with chronic lymphocytic leukemia (CLL).
In Europe, IMBRUVICA is already approved as a continuous therapy in several indications across three blood cancers (CLL, mantle cell lymphoma, and Waldenström’s macroglobulinemia). This approval will help IMBRUVICA gain wide recognition across various markets.
For the fiscal 2022 second quarter ended July 3, 2022, JNJ’s sales increased 3% year-over-year to $24.02 billion. The company’s gross profit came in at $16.10 billion, up 2.4% from the prior-year period. Its adjusted pre-tax earnings came in at $8.17 billion for the quarter, indicating a 5.1% year-over-year improvement.
While its adjusted net earnings increased 4.3% year-over-year to $6.91 billion, its adjusted EPS rose 4.4% to $2.59. As of July 3, 2022, the company had $10.98 billion in cash and cash equivalents.
Analysts expect an EPS of $10.07 for fiscal 2022 ending December 31, 2022, indicating a rise of 2.8% from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
The consensus revenue estimate of $95.12 billion for the same fiscal year represents a 1.4% year-over-year improvement. Its EPS is expected to grow at a rate of 4.1% per annum over the next five years.
Over the past nine months, the stock has gained 1.6% to close the last trading session at $166.09.
JNJ’s POWR Ratings reflect this promising outlook. It has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Stability and a B for Growth, Value, and Quality. Click here to see the additional ratings for JNJ’s Sentiment and Momentum. JNJ is ranked #1 of 171 stocks in the Medical – Pharmaceuticals industry.
Bristol-Myers Squibb Company (BMY)
BMY develops, licenses, manufactures, and markets biopharmaceutical products worldwide. It offers hematology, oncology, cardiovascular, and therapeutic immunology classes and sells products to wholesalers, distributors, pharmacies, retailers, hospitals, clinics, and government agencies. It has a 0.39 beta.
BMY paid a $0.54 quarterly cash dividend on August 1, 2022. The stock pays a $2.16 per share dividend annually, translating to a 2.9% yield. The company’s dividend has grown at a 6.4% rate over the past five years.
On August 10, 2022, BMY and 2seventy bio, Inc. (TSVT) announced positive topline results from KarMMa-3, a Phase 3 open-label study evaluating Abecma compared to standard combination regimens in relapsed and refractory multiple myeloma, that demonstrated a significant improvement in progression-free survival.
These results ensure the clinical benefit of using a CAR T cell therapy earlier in the multiple myeloma treatment paradigm and will help gain widespread reach across the markets.
BMY’s total revenues for its fiscal 2022 second quarter ended June 30, 2022, increased 1.6% year-over-year to $11.89 billion. The company’s non-GAAP pre-tax income came in at $5.01 billion for the quarter, indicating a 12.4% rise from the year-ago period.
BMY’s non-GAAP net earnings came in at $4.15 billion, representing a 13.2% rise from the prior-year period. Its non-GAAP EPS increased 18.4% year-over-year to $1.93. It had $10.75 billion in cash and equivalents as of June 30, 2022.
The consensus EPS estimate of $7.52 for fiscal 2022 ending December 31, 2022, indicates a marginal year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive. Its EPS is expected to grow at a rate of 4.9% per annum over the next five years.
Over the past nine months, the stock has gained 25% to close the last trading session at $74.53.
BMY’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system. It has an A grade for Value and a B for Growth, Sentiment, and Quality.
In addition to the POWR Ratings grades we have just highlighted, one can see BMY’s Stability and Momentum ratings here. BMY is ranked #5 in the same industry.
JNJ shares were trading at $167.70 per share on Tuesday afternoon, up $1.61 (+0.97%). Year-to-date, JNJ has declined -0.71%, versus a -8.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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