The U.S. healthcare industry continues to be a global leader. The industry’s growth in the coming years is expected to be driven by rising health awareness, an aging population, and an increase in chronic diseases. The pharmaceutical industry is expected to reach $1.50 trillion by 2023.
The increasing adoption of advanced technologies like AI and the cloud, as well as the growing market for personalized medicine, are boosting the industry’s prospects. Moreover, virtual health services like telehealth and telemedicine should significantly contribute to the industry’s growth.
Pharmaceutical sales revenues in the United States have accounted for nearly half of the global total in recent years. Moreover, overall spending on medicines in the U.S. has by far exceeded half a trillion billion dollars.
Given this backdrop, fundamentally strong healthcare stocks AbbVie Inc. (ABBV) and Bristol-Myers Squibb Company (BMY) might be solid buys now.
AbbVie Inc. (ABBV)
ABBV is a healthcare company that discovers, develops, manufactures, and sells pharmaceuticals worldwide with a focus and capabilities to address health challenges.
On November 16, ABBV announced that Health Canada had approved UBRELVY® (ubrogepant tablet) for the acute treatment of migraine, with or without aura, in adults.
Tracey Ramsay, Vice President and General Manager, AbbVie Canada, said, “UBRELVY® as the first oral gepant approved in Canada for the acute treatment of migraine is an important milestone in our commitment to bring innovative new medicines to Canadians with the goal make meaningful difference for patients.”
On November 7, ABBV announced new results from its exploratory NOVA phase 2 dose-ranging study evaluating the efficacy and safety of AGN-151607, a novel investigational neurotoxin for the prevention of postoperative atrial fibrillation (POAF) in cardiac surgery patients.
The data from this study suggests which patient populations may benefit from this intervention, and the company looks forward to exploring further development opportunities in the cardiac field.
On September 9, ABBV declared a quarterly dividend of $1.41 per common share, payable to shareholders on November 15.
ABBV pays a $5.92 per share dividend annually, which translates to a 3.89% yield on the current price. Its dividend payouts have grown at a CAGR of 9.6% over the past three years and 17.3% over the past five years. The company has nine years of consecutive dividend growth.
ABBV’s net revenues increased 3.3% year-over-year to $14.81 billion in the third quarter ended September 30, 2022. The company’s operating income increased 6.9% year-over-year to $4.60 billion. Its adjusted after-tax earnings increased 29.1% year-over-year to $6.53 billion, while its adjusted EPS rose 29.3% year-over-year to $3.66.
Street EPS estimate of $3.66 for the fourth fiscal quarter ending December 2022 reflects a rise of 10.7% year-over-year. Likewise, its revenue estimate of $15.33 billion for the same quarter indicates an improvement of 3% from the prior-year quarter. Additionally, ABBV has topped consensus EPS estimates in each of the trailing four quarters.
ABBV’s stock has gained 29.7% over the past year, closing its last trading session at $152.16. It has gained 5.4% over the past month.
ABBV’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ABBV has an A grade for Quality and a B grade for Growth and Value. It is ranked #6 out of 161 stocks in the Medical - Pharmaceuticals industry.
To see the additional POWR Ratings for ABBV for Momentum, Stability, and Sentiment, click here.
Bristol-Myers Squibb Company (BMY)
BMY engages in the discovery, development, licensing, manufacture, and sale of biopharmaceutical products globally. The company’s offerings include products for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.
On November 10, BMY Canada announced Health Canada’s approval of CAMZYOS (mavacamten capsules) for the treatment of symptomatic obstructive hypertrophic cardiomyopathy of New York Heart Association Class II-III in adult patients. CAMZYOS is the first Canadian-approved allosteric and selective cardiac myosin inhibitor and represents BMY’s advancement to improve functional capacity and quality of life in many patients.
On November 3, it was announced that BMY had offered a $25 million equity investment to Kura Oncology, Inc. (KURA), a clinical-stage biopharmaceutical company committed to realizing the promise of precision medicines for the treatment of cancer.
Troy Wilson, Ph.D., J.D., President and Chief Executive Officer of Kura Oncology, said, “This equity investment strengthens the relationship between our organizations and enables Bristol Myers Squibb to provide valuable strategic input into our global development strategy. We are honored and excited to have their support and look forward to their input as we work to deliver innovative science with the potential to benefit patients.”
On November 1, BMY paid its quarterly dividend of $0.54 per share. The company pays a $2.16 per share dividend annually, which yields 2.80%.
In terms of its forward EV/EBIT, BMY is currently trading at 10.51x, 38.9% below the industry average of 17.21x. Its forward non-GAAP P/E multiple of 10.13 is 45.6% lower than the industry average of 10.13.
In the fiscal third quarter ended September 30, BMY’s earnings before income taxes increased 2.4% year-over-year to $2.21 billion. The company’s net earnings amounted to $1.61 billion, up 3.6% year-over-year, while the non-GAAP EPS improved 3.1% from the prior-year quarter to $1.99.
Analysts expect BMY’s EPS for the fiscal second quarter ending June 2023 to be $2.07, indicating a 7.2% year-over-year growth. The company’s revenue is expected to increase by 1.2% from the prior year to $12.03 billion in the same quarter.
The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, BMY has gained 29.8% to close its last trading session at $77.16. The stock has gained 23.8% year-to-date.
This promising prospect is reflected in BMY’s POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
BMY has an A grade for Value and a B for Stability, Sentiment, and Quality. It is ranked #2 in the same industry.
Beyond what we’ve stated above, we have also given BMY grades for Growth and Momentum. Get all BMY ratings here.
ABBV shares were trading at $154.63 per share on Friday afternoon, up $2.47 (+1.62%). Year-to-date, ABBV has gained 18.65%, versus a -16.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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