Over the past few weeks, the stock market has been experiencing stomach-churning volatility due to various macroeconomic concerns. This is evident in the CBOE Volatility Index’s 74.9% increase year-to-date. U.S. GDP declined 1.4% in the first quarter, and the consumer price index increased 8.3% year-over-year in April, exceeding the 8.1% estimate. Therefore, a more hawkish Fed stance is expected to bring down multi-decade high prices. And analysts do not expect the Fed will be able to do that without pushing the economy into a recession. Combined with the continuing geopolitical issues, these factors are expected to keep the market extremely volatile in the near term.
Since uncertainties prevail in the broader market, it could be wise to invest in low-beta stocks to cushion one’s portfolio against volatile market conditions. That’s because securities possessing low betas are less sensitive to broader market fluctuations.
Fundamentally sound stocks Merck & Co., Inc. (MRK), Gilead Sciences, Inc. (GILD), and AmerisourceBergen Corporation (ABC) possess low betas. So, we think it could be wise to bet on them now.
Merck & Co., Inc. (MRK)
Healthcare company MRK in Kenilworth, N.J., operates through two segments: Pharmaceutical; and Animal Health. Its Pharmaceutical segment provides human health pharmaceutical products in immunology, oncology, neuroscience, acute hospital care, and vaccine products. Its Animal Health segment offers veterinary pharmaceuticals, vaccines, and health management solutions and services. The stock has a 0.37 beta, indicating significant stability.
Last month, the European Commission approved MRK’s KEYTRUDA, anti-PD-1 therapy, a monotherapy to treat microsatellite instability-high (MSI-H) or deficient mismatch repair (dMMR) tumors in adult patients with unresectable or metastatic colorectal cancer. This approval allows the marketing of KEYTRUDA in all 27 EU members plus Iceland, Norway, and Northern Ireland. These developments are expected to extend the company’s global reach and profitability.
In the same month, MRK received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (FDA) for V116, the company’s investigational 21-valent pneumococcal conjugate vaccine to prevent invasive pneumococcal disease (IPD) and pneumococcal pneumonia in adults. This Breakthrough Therapy Designation provides MRK with more intensive guidance from the FDA on an efficient development program for this investigational vaccine.
In its fiscal 2022 first quarter, ended March 31, 2022, MRK's total sales increased 49.6% year-over-year to $15.90 billion. The company’s sales from the Pharmaceutical segment grew 52.7% year-over-year to $14.10 billion, while sales from the Animal Health segment rose 4.5% from its year-ago value to $1.48 billion. Its non-GAAP income from continuing operations before taxes amounted to $6.31 billion. Its non-GAAP net income and non-GAAP EPS came in at $5.43 billion and $2.14, respectively, registering an increase of 84.2% and 84.5% from the prior-year period.
Analysts expect MRK’s EPS to grow 30.4% year-over-year to $1.71 for its fiscal 2022 second quarter, ending June 30, 2022. The $13.67 billion consensus revenue estimate for the current quarter represents a 19.9% rise from the same period in 2021. It is no surprise that the company has surpassed the consensus EPS estimates in three of the trailing four quarters and the consensus revenue estimates in each of the trailing four quarters.
The stock has gained 23.1% in price year-to-date and 19.8% over the past year and closed yesterday's trading session at $94.64.
MRK's POWR Ratings reflect this promising outlook. It has an overall A grade, which equates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
MRK has an A grade for Growth and a B for Value, Stability, Quality, and Sentiment. Within the Medical-Pharmaceuticals industry, it is ranked #1 of 166 stocks. To see additional POWR Ratings (Momentum) for MRK, click here.
Click here to checkout our Healthcare Sector Report for 2022
Gilead Sciences, Inc. (GILD)
GILD in Foster City, Calif., is a biopharmaceutical company that discovers, develops, and commercializes medicines in various areas in the United States, Europe, and internationally. The company provides Genvoya, Odefsey, Stribild, and Atripla products to treat HIV/AIDS, Veklury for the treatment of coronavirus disease 2019, Ranexa for the treatment of chronic angina, and Tecartus, Yescarta, Trodelvy, and Zydelig products to treat hematology, oncology, and cell therapy. It has a beta of 0.39.
On May 2, GILD and Dragonfly Therapeutics entered a strategic collaboration to develop Dragonfly’s novel natural killer (NK) cell immunotherapies for oncology and inflammation. Under the agreement, GILD will receive an exclusive and worldwide license from Dragonfly for the 5T4-targeting investigational immunotherapy program, DF7001. It will also grant options to license worldwide rights to develop and commercialize additional NK cell engager programs.
On April 19, GILD’s company, Kite, received the FDA’s approval for a new state-of-the-art CAR T-cell therapy manufacturing facility in Frederick, Md. “The FDA approval of our Maryland site marks an important milestone within our global CAR T-cell therapy manufacturing network and will enable us to significantly expand our production capacity and further strengthen our ability to meet the needs of people living with difficult-to-treat blood cancers,” said Christi Shaw, CEO of Kite.
In its fiscal 2022 first quarter, ended March 31, 2022, GILD's total revenues grew 2.6% year-over-year to $6.59 billion, while its product sales improved 3.1% from the year-ago value to $6.53 billion. The company's non-GAAP income from operations rose 2.9% year-over-year to $3.52 billion. In addition, its non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.68 billion and $2.12, respectively, registering an increase of 3.8% and 3.9% from the prior-year period.
Analysts expect GILD's EPS for its fiscal 2022 fourth-quarter, ending Dec. 31, 2022, to come in at $1.41, representing a 104.4% rise year-over-year. The company has an impressive earnings history; it has surpassed the consensus EPS estimates in three of the trailing four quarters.
GILD’s shares have increased 4.1% in price over the past month and closed yesterday's trading session at $64.35.
GILD's strong fundamentals are reflected in its POWR Ratings. It has an overall B grade, which equates to Buy in our proprietary rating system.
GILD has a grade of A for Value and a B for Quality. Within the Biotech industry, it is ranked #8 of 392 stocks. To see additional POWR Ratings (Growth, Stability, Sentiment, and Momentum) for GILD, click here.
AmerisourceBergen Corporation (ABC)
Conshohocken, Pa.-based ABC sources and distributes pharmaceutical products in the U.S. and internationally. The company operates in two segments: Pharmaceutical Distribution; and Other. ABC distributes generic pharmaceuticals, over-the-counter healthcare products, home healthcare supplies, and equipment. It also provides pharmacy management, staffing, consulting services, and packaging solutions to institutional and retail healthcare providers. ABC has a beta of 0.45.
In March, ABC extended its pharmaceutical supply agreement with Express Scripts Holding Company (ESRX) through 2026 to provide brand pharmaceuticals to pharmacies and patients. This partnership is expected to contribute to the company’s revenue streams.
ABC's revenues increased 17.4% year-over-year to $57.72 billion in its fiscal 2022 second quarter, ended March 31, 2022. Its adjusted gross profit improved 46.6% year-over-year to $2.22 billion. Its adjusted operating income grew 29.7% from the prior-year period to $916.61 million. In addition, its adjusted net income attributable to ABC and adjusted EPS came in at $683.34 million and $3.22, respectively, registering an increase of 30.3% and 27.3% year-over-year.
Analysts expect ABC's revenue for its fiscal 2022 third quarter, ending June 30, 2022, to be $59.10 billion, representing a 10.7% rise year-over-year. The Street expects the company's EPS for the current quarter to come in at $2.58, representing a 19.4% increase year-over-year. The company has an impressive revenue and earnings history; it has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
ABC has improved 27.3% over the past six months and 29.2% over the past year. It closed yesterday’s trading session at $153.08.
ABC’s POWR Ratings reflect this strong outlook. The stock has an overall A rating, which translates to Strong Buy in our proprietary system.
ABC has a grade of A for Growth and a B grade for Stability, Sentiment, and Value. Within the Medical - Services industry, it is ranked #2 of 86 stocks. To see additional POWR Ratings (Momentum, and Quality) for ABC, click here.
Click here to checkout our Healthcare Sector Report for 2022
MRK shares were trading at $94.30 per share on Wednesday morning, down $0.34 (-0.36%). Year-to-date, MRK has gained 24.14%, versus a -16.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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