The early-year market rally lost its steam gradually owing to the inpouring of hotter-than-anticipated macroeconomic data. The Fed’s hawkish comments further aggravated the already existing investor anxieties.
Amid such uncertainties that are likely to persist in upcoming months, let us have a look at stable stocks Johnson & Johnson (JNJ) and Pfizer Inc. (PFE), which could help investors keep money in their pockets.
Although inflation has retreated from multi-decade highs, it is still above the Fed’s target of 2%. In addition to sticky inflation, consumer spending remains resilient, and the job data resilient.
The concoction of these data dashed investors’ sentiments and diminished the likelihood of a Fed pivot. A fresh bout of anxieties set in after Fed Chair Jerome Powell signaled more aggressive rate hikes in the near term.
Moreover, experts predict that such persistent rate hikes could trigger a recession. Bank of America Corporation (BAC) Chairman and CEO Brian Moynihan said, "Our base projection is for a recession to occur in the U.S. economy beginning in the third quarter of 2023, occur through the fourth quarter of 2023 and into the first quarter of 2024."
The early-year market rally was premised on the idea of easing inflation, booming economic data, and anticipations of rate hikes to end soon. But with situations reversed, experts anticipate the reversal to be excruciating and result in a bear market soon.
Amid such volatilities, fundamentally sound stocks JNJ and PFE might be solid portfolio additions now that should help garner significant returns.
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company operates through the broad segments of Consumer Health; Pharmaceuticals; and MedTech.
Recently, JNJ announced that Kenvue Inc., a wholly owned subsidiary of JNJ, priced an offering of the following series of senior unsecured notes in an aggregate principal amount of $7.75 billion. JNJ expects that the offering of the notes will be completed on or about March 22, 2023.
Kenvue intends to use the proceeds from the offering of the notes as partial consideration to JNJ for the Consumer Health Business that JNJ would transfer to Kenvue.
On February 24, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) recommended the marketing authorization for AKEEGA® (niraparib and AA), given with prednisolone, to treat adult patients with metastatic castration-resistant prostate cancer (mCRPC) and BRCA1/2 mutations (germline and/or somatic).
On January 3, JNJ declared a dividend for the first quarter of 2023 of $1.13 per share on its common stock, paid to the shareholders on March 7, 2023. JNJ has raised dividends for 60 consecutive years. This reflects its cash generation abilities.
Its annual dividend of $4.52 yields 2.96% on the current market price, and its four-year average dividend yield is 2.60%. The company’s dividend payouts have increased at a 6% CAGR over the past three years and a 6.1% CAGR over the past five years.
JNJ’s trailing-12-month gross profit margin of 67.36% is 21.4% higher than the industry average of 55.48%. Its trailing-12-month EBITDA of 34.46% is 867.3% higher than the 3.56% industry average.
For the fiscal fourth quarter of 2022, JNJ’s reported sales came in at $23.71 billion. Its non-GAAP adjusted net earnings rose 9.5% year-over-year to $6.22 billion. The company’s non-GAAP adjusted net earnings per share rose 10.3% from its year-ago value to $2.35.
For the fiscal first quarter ending March 2023, the consensus EPS estimate is $2.53. Its revenue is expected to increase marginally year-over-year to $23.59 billion for the same quarter. Additionally, JNJ topped consensus EPS estimates in each of the trailing four quarters.
The stock has lost marginally over the past five days to close its last trading session at $151.24. It has a five-year beta of 0.53.
JNJ’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JNJ is rated an A for Stability and a B for Value, Sentiment, and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #5 out of 169 stocks.
Click here to see additional POWR Ratings for Momentum and Growth for JNJ.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. The company serves wholesalers, retailers, hospitals, clinics, government agencies, as well as disease control and prevention centers.
On February 22, PFE announced that the U.S. Food and Drug Administration (FDA) had granted Priority Review for the company’s Biologics License Application (BLA) for elranatamab, an investigational B-cell maturation antigen (BCMA) CD3-targeted bispecific antibody (BsAb), for the treatment of patients with relapsed or refractory multiple myeloma (RRMM).
On February 16, PFE announced positive results from the Phase 3 TALAPRO-2 study of TALZENNA, an oral poly ADP-ribose polymerase inhibitor, in combination with XTANDI, demonstrating a statistically significant and clinically meaningful improvement in radiographic progression-free survival.
On February 10, PFE announced that the FDA had approved its supplemental New Drug Application for CIBINQO (abrocitinib), expanding its indication to include adolescents. CIBINQO was previously approved only for treating adults 18 years and older. These developments in the company’s product line should boost revenues in the near future.
On December 12, 2022, PFE’s board of directors declared an increase in the quarterly dividend on the company’s common stock to $0.41, paid to holders of the Common Stock on March 3, 2023. This marks its 337th consecutive quarterly dividend payment.
Its annual dividend of $1.64 yields 4.09% on the current market price, and its four-year average dividend yield is 3.64%. The company’s dividend payouts have increased at a 5.2% CAGR over the past three years and a 5.5% CAGR over the past five years.
PFE’s trailing-12-month gross profit margin of 66.02% is 19% higher than the industry average of 55.48%. Its trailing-12-month EBITDA of 43.88% is significantly higher than the 3.56% industry average.
During the fiscal fourth quarter that ended December 2022, PFE’s revenues rose 1.9% year-over-year to $24.29 billion. Its income from continuing operations improved 39.7% year-over-year to $5 billion.
Non-GAAP adjusted net income attributable to PFE common shareholders rose 44.2% year-over-year to $6.55 billion, while its non-GAAP adjusted earnings per share grew 44.3% year-over-year to $1.14.
Streets expect PFE’s EPS and revenue for the fiscal year ending December 2023 to be $3.46 and $69.52 billion, respectively. Additionally, PFE topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock declined 1.7% intraday to close its last trading session at $39.46. It has a five-year beta of 0.59.
PFE’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system.
PFE is rated an A in Value and a B in Quality. Within the same industry, it is ranked #20.
Click here to see additional POWR Ratings for PFE (Momentum, Growth, Stability, and Sentiment).
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JNJ shares were trading at $151.72 per share on Friday morning, up $0.48 (+0.32%). Year-to-date, JNJ has declined -13.50%, versus a 2.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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