Despite the pandemic being in the rearview mirror, the pharmaceutical industry is still going strong and innovating at an ever-increasing pace to better address society’s evolving healthcare needs.
The growth is also fueled by the aging population of the United States and globally. It has been reported that more than 16% of the U.S. population is above 65 years of age, and this number is expected to keep growing with time.
As a result, healthcare expenditure in the United States is expected to reach $6.2 trillion by 2028, accounting for nearly one-fifth of the nation’s gross domestic product.
Given an inelastic demand for healthcare products and services, pharmaceutical stocks present very safe and stable opportunities for investors amid the ongoing economic headwinds. Hence, fundamentally strong stocks Eli Lilly & Co. (LLY), Pfizer Inc. (PFE), and Zoetis Inc. (ZTS) could be ideal investments now.
Eli Lilly & Co. (LLY)
LLY discovers, develops, and markets human pharmaceuticals worldwide. The company provides diabetes, oncology, neuroscience, and other products.
On November 7, LLY announced that the rollout Tempo Personalized Diabetes Management Platform will begin in the United States before the end of this year. This technology would help adults suffering from Type 1 or Type 2 diabetes and clinicians make informed, data-backed decisions to manage treatment with LLY insulins.
This launch is expected to help LLY deliver greater value to those relying on insulin and have a positive impact on the company’s topline.
For the third quarter of fiscal 2022, ended September 30, LLY’s revenue increased 2.5% year-over-year to $6.94 billion, primarily driven by volume growth of key growth products. During the same period, the company’s non-GAAP net income increased 10.8% year-over-year to $1.79 billion. This translated to a non-GAAP quarterly EPS of $1.98, up 11.8% year-over-year.
The consensus revenue estimate of $30.03 billion for fiscal 2023, ending December 2023, represents a 4.7% improvement year-over-year. Also, Street expects LLY’s EPS to grow 16.2% year-over-year to $9.10 during the same period.
The stock has gained 3.3% over the past month and 33.1% year-to-date to close the last trading session at $361.72.
LLY’s fundamental strength and stable prospects are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy signal in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LLY also has a grade B for Stability and Quality. It is ranked #23 of 162 stocks in the Medical - Pharmaceuticals industry.
Additional ratings for LLY’s Growth, Value, and Sentiment can be found here.
Pfizer Inc. (PFE)
PFE is a world-renowned research-based biopharmaceutical company. The company discovers, develops, manufactures, sells, and distributes biopharmaceutical products, such as medicines, vaccines, and other therapies. The company operates through two segments: Biopharma and PC1.
On November 4, PFE and BioNTech SE (BNTX) announced updated data from a Phase 2/3 clinical trial. The trial demonstrated a robust neutralizing immune response one month after a 30-µg booster dose of the companies’ Omicron BA.4/BA.5-adapted bivalent COVID-19 vaccine. This marks an important step for the company in the management of covid infections worldwide.
On November 3, PFE announced that its investigational cancer immunotherapy, elranatamab, received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (FDA) for the treatment of people with relapsed or refractory multiple myeloma (RRMM). This finalized the 12th FDA breakthrough therapy’s designation in Oncology.
This milestone is consistent with PFE’s vision to set the highest standards for quality and value in medicines and vaccines.
During the fiscal third quarter ended September 2022, PFE’s income from continuing operations improved 5.8% year-over-year to $8.65 billion. Its non-GAAP net income attributable to Pfizer Inc. common shareholders rose 39.7% year-over-year to $10.17 billion, while its non-GAAP EPS grew 40.2% year-over-year to $1.78.
Analysts expect PFE’s revenue and EPS for the fiscal year 2022 to increase 23.2% and 46.2% year-over-year to $100.15 billion and $6.46, respectively. Moreover, the company has an impressive earnings surprise history as it has topped the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 9.2% over the past month to close the last trading session at $48.85
PFE’s stellar prospects have earned it an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. It also has an A grade for Value and a grade B for Growth, Sentiment, and Quality.
PFE is ranked #2 of 162 stocks in the Medical – Pharmaceutical industry.
Click here for PFE’s ratings for Momentum and Stability.
Zoetis Inc. (ZTS)
ZTS is engaged in discovering, developing, and manufacturing animal health medicines, vaccines, and diagnostic products in the United States and internationally. Its target market primarily includes livestock producers, veterinarians, and retail outlets.
On November 8, ZTS announced that it has agreed to sell $1.35 billion of senior notes, consisting of $600 million aggregate principal amount of 5.400% senior notes due 2025 and $750 million aggregate principal amount of 5.600% senior notes due 2032, in an underwritten public offering.
The proceeds are intended to be used to pay the principal of senior notes due 2023 and general corporate purposes.
On October 13, ZTS declared a dividend of $0.325 per share for the fourth quarter of 2022. The dividend will be paid on December 1, 2022, to all holders of record of the company’s common stock as of November 1, 2022. The company pays $1.30 annually as dividends. This translates to a yield of 0.86% at the current price, better than the 4-year average dividend yield of 0.56%.
ZTS has increased its dividend payouts at a 20.8% CAGR over the past five years.
For the third quarter of fiscal 2022, ended September 30, ZTS reported revenue of $2 billion, registering a marginal increase year-over-year. During the same period, the company’s adjusted net income came in at $566 million, or $1.21 per share.
Analysts expect ZTS’s revenue and EPS for the fiscal ending December 2023 to increase 6.3% and 11.1% year-over-year to $8.55 billion and $5.41, respectively.
The stock has gained 1% over the past month to close the last trading session at $150.47.
ZTS has an overall rating of B, which equates to a Buy in our POWR Ratings system. It has a grade of A for Quality.
ZTS is ranked #22 in the same industry. Additional ratings for Growth, Momentum, Sentiment, Stability, and Value for ZTS are available here.
LLY shares were trading at $361.72 per share on Thursday afternoon, up $0.84 (+0.23%). Year-to-date, LLY has gained 32.74%, versus a -14.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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