The pharmaceutical industry played a pivotal role during the pandemic as it came out with crucial vaccines and therapies. Moreover, the pharmaceutical industry is expected to witness solid growth with an aging population and the rise of lifestyle diseases spawning out of poor health choices.
According to Statista, the worldwide-pharmaceutical revenue is expected to grow at a CAGR of 5.4% to reach $1.44 trillion by 2027.
Moreover, demand for medicines and healthcare remains steady irrespective of the economic cycles. Therefore, pharma could be a safe industry to invest in amid the current economic uncertainties. Investors’ interest in pharmaceutical stocks is evident from the iShares U.S. Pharmaceuticals ETF’s (IHE) 9.5% returns over the past three months.
Given this backdrop, it could be wise to invest in fundamentally strong pharma stocks Johnson & Johnson (JNJ), Novartis AG (NVS), and GSK plc (GSK).
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. It operates under three segments: Consumer Health, Pharmaceutical, and MedTech.
Over the last three years, JNJ’s dividend payouts have grown at a 5.9% CAGR. Its four-year average dividend yield is 2.60%, and its forward annual dividend of $4.52 per share translates to a 2.51% yield. It is expected to pay a quarterly dividend of $1.13 per share on March 7, 2023.
On December 22, 2022, JNJ announced its acquisition of Abiomed, Inc. JNJ’s CEO, Joaquin Duato, believes that this acquisition marks an important step on the company’s path to accelerating growth in its MedTech business segment and delivering innovative medical technologies to more people around the world.
JNJ’s reported sales for the third quarter increased 1.9% year-over-year to $23.79 billion. Its net earnings increased 21.6% from the year-ago value to $4.46 billion. The company’s EPS came in at $1.68, representing a 22.6% increase from the prior-year quarter.
JNJ's EPS for the quarter ended December 31, 2022, is expected to increase 5.1% year-over-year to $2.24. Its revenue for the quarter ending March 31, 2023, is expected to increase 1.5% year-over-year to $23.78 billion.
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 three months, the stock has gained 11.3% to close the last trading session at $180.25.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The company 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.
In addition, it has an A grade for Stability and a B for Sentiment and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #4 of 163 stocks.
Click here to see the additional POWR Ratings of JNJ for Growth, Value, and Momentum.
Novartis AG (NVS)
Headquartered in Basel, Switzerland, NVS researches, develops, manufactures, and markets healthcare products worldwide. The company operates through two segments, Innovative Medicines, and Sandoz.
Over the last three years, NVS’ dividend payouts have grown at a 5.5% CAGR. Its four-year average dividend yield is 3.57%, and its forward annual dividend of $3.33 per share translates to a 3.60% yield. It paid an annual dividend of $3.33 per share on March 17, 2022.
On December 6, 2022, NVS and MorphoSys AG’s (MOR), a fully-owned subsidiary of Constellation Pharmaceuticals, Inc., entered into a global licensing agreement. The agreement aims to enhance research and develop and commercialize pre-clinical inhibitors of a novel cancer target. This is a milestone partnership in oncology.
For the fiscal third quarter ended September 30, 2022, NVS’ total liabilities declined 10% to $57.57 billion, compared to $63.97 million for the fiscal year ended December 31, 2021. Its cash and cash equivalents came in at $8.73 billion, representing an increase of 21% year-over-year. Also, its net income came in at $1.57 billion.
Analysts expect NVS’ EPS for the quarter ended December 31, 2022, to increase 1.6% year-over-year to $1.42. Its revenue for the fiscal quarter ending March 31, 2023, is expected to increase 1% year-over-year to $12.66 billion. Over the past three months, the stock has gained 21.4% to close the last trading session at $92.29.
NVS’ POWR Ratings reflect this promising outlook. The stock's overall A rating translates to a Strong Buy. It is ranked #15 in the same industry. It has an A grade for Stability and a B for Value and Quality.
We have also given NVS grades for Growth, Momentum, and Sentiment. Get all NVS ratings here.
GSK plc (GSK)
Headquartered in Brentford, the United Kingdom, GSK engages in the creation, discovery, development, manufacture, and marketing of pharmaceutical products, vaccines, over-the-counter medicines, and health-related consumer products worldwide. It operates through four segments: Pharmaceuticals, Pharmaceuticals R&D, Vaccines, and Consumer Healthcare.
GSK’s four-year average dividend yield is 5.20%, and its trailing twelve months annual dividend of $1.66 per share translates to a 4.75% yield. It is expected to pay a quarterly dividend of $0.32 per share on January 12, 2023.
On January 4, 2023, WuXi Biologics announced a license agreement with GSK. Senior Vice President and Head of Research at GSK, John Lepore, said, "This agreement with WuXi Biologics builds on our oncology portfolio of tumor cell targeting agents by providing GSK with access to potential best-in-class T-cell engaging antibodies that have been optimized for effective tumor killing with a desirable safety profile, offering the potential to address significant unmet medical need in patients with multiple tumor types."
GSK’s turnover for the third quarter increased 18.1% year-over-year to £7.83 billion ($9.46 billion). The company’s gross profit increased 17.2% year-over-year to £5.41 billion ($6.54 billion). Its adjusted total profit attributable to shareholders increased 25% year-over-year to £2.02 billion ($2.44 billion), while its adjusted total EPS came in at £46.9p, representing a 25.4% increase from the prior-year quarter.
GSK’s EPS for fiscal 2023 is expected to increase 7.4% year-over-year to $3.54. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 16.4% to close the last trading session at $34.92.
It is no surprise that GSK has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It is ranked #14 in the Medical - Pharmaceuticals industry. In addition, it has an A grade for Value and a B for Sentiment and Quality.
Click here to see the other ratings of GSK for Growth, Momentum, and Stability.
JNJ shares were trading at $176.12 per share on Monday afternoon, down $4.13 (-2.29%). Year-to-date, JNJ has declined -0.30%, versus a 2.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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