Markets expect the Fed to stick to its aggressive rate hikes after Jerome Powell’s speech at Jackson Hole. The Fed has been strict on its path for a while to bring inflation down to its 2% target. However, given this trajectory, analysts at BlackRock expect a recession early next year.
Healthcare has long been considered one of the most reliable defensive sectors and a viable portfolio constituent when equity markets turn volatile.
Additionally, the global pharmaceuticals market is expected to reach $1.59 trillion in 2022, growing at a 9.1% CAGR, and $2.14 trillion in 2026, expanding at a 7.7% CAGR. And we believe these fundamentally strong pharma stocks Johnson & Johnson (JNJ), AbbVie Inc. (ABBV), and Bristol-Myers Squibb Company (BMY), might be solid buys in an economic downturn.
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.
On June 20, JNJ announced the launch of the new J&J Satellite Center for Global Health Discovery at Singapore’s Duke-NUS Medical School. As the first of the J&J Centers for Global Health Discovery in the Asia-Pacific region, the Satellite Center at Duke-NUS aims to help drive new solutions to address flaviviruses. This might benefit the company.
JNJ’s gross profit increased 2.4% year-over-year to $16.10 billion in the second quarter ended June 30. Its sale to customers grew 3% from the year-ago value to $24.02 billion, while its adjusted net earnings improved 4.3% year-over-year to $6.91 billion. The company’s adjusted net earnings per common share increased 4.4% from its year-ago value to $2.59.
The consensus EPS estimate of $10.08 for the fiscal year ending December 2022 indicates a 2.9% improvement year-over-year. The consensus revenue is expected to increase 1.9% year-over-year, $95.53 billion for the same year. Additionally, JNJ has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 1.3% over the past five days and marginally intraday to close its last trading session at $163.18.
JNJ’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.
JNJ is rated an A in Stability and a B in Growth, Value, Sentiment, and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #1 out of 165 stocks.
To see additional POWR Ratings for Momentum for JNJ, click here.
AbbVie Inc. (ABBV)
ABBV is a healthcare company that discovers, develops, manufactures, and sells pharmaceuticals worldwide with a focus and capabilities to address some of the world’s greatest health challenges.
On August 24, ABBV announced that the U.S. Food and Drug Administration (FDA) had approved the use of IMBRUVICA® (ibrutinib) to treat pediatric patients one year and older with chronic graft versus host disease (cGVHD). This is expected to help the company ramp up its revenue.
Earlier in the same month, ABBV and Sosei Group Corporation announced that they had entered a new drug discovery collaboration and option-to-license agreement to discover, develop, and commercialize small molecules that modulate novel G protein-coupled receptor (GPCR) targets associated with neurological disease. The company is expected to be responsible for clinical, regulatory, and commercial development.
For the second quarter of 2022 ended June 30, ABBV’s net revenues increased 4.5% year-over-year to $14.58 billion. Its adjusted earnings and adjusted earnings per share came in at $6.01 billion and $3.37, up 10.7% and 11.2% from the prior-year period.
Street EPS estimate for the third fiscal quarter (ending September 2022) of $3.60 reflects a rise of 8.1% year-over-year. Likewise, Street revenue estimate for the same quarter of $14.99 billion indicates an improvement of 4.5% from the prior-year period. Additionally, ABBV has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, ABBV’s stock has gained 23.3% to close its last trading session at $137.59. It has gained 2.4% over the past five days.
This promising prospect is reflected in ABBV’s POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
ABBV has an A grade for Quality and a B grade for Growth, Value, and Sentiment. It is ranked #4 in the same industry.
Click here to see the additional POWR Ratings for ABBV (Momentum and Stability).
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 August 23, Bristol Myers Squibb Canada (BMS) announced Health Canada’s approval of OPDIVO® (nivolumab) 360 mg (injection for intravenous use) in combination with platinum-doublet chemotherapy every three weeks for three cycles for adult patients with resectable non-small cell lung cancer (NSCLC) in the neoadjuvant setting. This might prove to be beneficial for the company.
On August 17, BMY announced that it had successfully completed its Turning Point Therapeutics, Inc. (TPTX) acquisition in an all-cash transaction. This acquisition is expected to strengthen BMY’s leading oncology franchise further.
In the second quarter ended June 30, BMY’s total revenues increased 1.6% year-over-year to $11.89 billion. The company’s non-GAAP net earnings attributable to BMY amounted to $4.15 billion, up 13.2% year-over-year, while the non-GAAP EPS improved 18.4% from the prior-year quarter to $1.93.
Analysts expect BMY’s revenue for the fiscal year 2023 to be $47.77 billion, indicating a 3.5% year-over-year growth. The company’s EPS is expected to increase 6.9% from the prior year to $8.03 for the same fiscal year. BMY has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
BMY has gained 10.1% year-to-date and 1.9% in the past five days to close its last trading session at $68.65.
BMY’s strong fundamentals are reflected in its POWR Ratings. The stock's overall A rating translates to Strong Buy in our proprietary rating system.
BMY has an A grade for Value and a B for Growth, Sentiment, and Quality. It is ranked #3 in the same industry.
Beyond what we’ve stated above, we have also given BMY grades for Momentum and Stability. Get all BMY ratings here.
JNJ shares were trading at $164.24 per share on Wednesday afternoon, up $1.06 (+0.65%). Year-to-date, JNJ has declined -2.10%, versus a -15.50% 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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