Although several macroeconomic headwinds marred the overall economy, the pharmaceutical companies fared comparatively well due to the inelastic demand for its products.
Given this backdrop, let us delve deeper into some pharmaceutical stocks, Novo Nordisk A/S (NVO), Bristol-Myers Squibb Company (BMY), and Takeda Pharmaceutical Company Limited (TAK) now.
The Fed’s persistent interest rate hikes, high consumer spending despite sky-high inflation, and a resilient job market have stoked fears of a recession. In addition, the worries were rekindled amid the recent banking collapses. Investor sentiments were crushed, and market uncertainties are anticipated to hover for quite a while.
Pharmaceutical companies that thrived during the pandemic years were not entirely out of the ambit of the economic headwinds. Despite facing challenges such as high inflation, rate hikes, and supply chain issues, these companies remained resilient, given the inelastic demand for healthcare products and services.
Moreover, the healthcare sector is anticipated to remain robust in the upcoming months, thanks to rapid technological advancements, an increasing elderly population, rising healthcare awareness, and government support.
It is predicted by the Centers for Medicare & Medicaid Services (CMS) that, on average, National Health Expenditures (NHE) are expected to grow 5.1% per year until 2030. Also, revenue in the pharmaceuticals market is expected to grow at a CAGR of 5.4%, resulting in a market volume of $1.44 trillion by 2027.
Given the industry’s long-term growth prospects, it might be wise to consider fundamentally strong pharmaceutical stocks NVO, BMY, and TAK now.
Novo Nordisk A/S (NVO)
Headquartered in Bagsvaerd, Denmark, NVO is a global healthcare company engaged in the research, development, manufacture, and marketing of pharmaceutical products worldwide. The company operates through two segments: Diabetes and Obesity care; and Biopharm.
On February 1, NVO initiated a share repurchase program as a part of the overall share repurchase program of up to DKK 28 billion ($4.07 billion) to be executed during a 12-month period. Under this program, NVO intends to repurchase B shares for an amount up to DKK 5.60 billion ($813.75 million) in the period from 1 February 2023 to 2 May 2023.
The total dividend for 2022 of DKK 12.40 includes both the interim dividend of DKK 4.25 for each Novo Nordisk A and B share of DKK 0.20, which was paid in August 2022, and the final dividend of DKK 8.15 for each NVO A and B share of DKK 0.20 to be paid in March 2023.
NVO’s annual dividend of $2.38 yields 1.54% on its current price. Its dividends have grown at 12.8% and 6.7% CAGRs over the past three and five years, respectively. NVO’s four-year average dividend yield is 1.78%. This reflects the company’s solid shareholder return ability.
NVO’s trailing-12-month EBITDA margin of 45.73% is significantly higher than the industry average of 3.17%. Its trailing-12-month ROCE, ROTC, and ROTA of 72%, 45.74%, and 23.01% compare to the industry average of negative 39.46%, 21.84%, and 31.42%, respectively.
NVO’s net sales for the fiscal year that ended December 31, 2022, increased 25.7% year-over-year to DKK176.95 billion ($25.71 billion), while its operating profit increased 27.6% year-over-year to DKK74.81 billion ($10.87 billion). The company’s net profit during the period was DKK55.53 billion ($8.07 billion) and DKK24.44 per share, up 16.3% and 17.8% year-over-year, respectively.
Analysts expect NVO’s EPS and revenue for the fiscal quarter ending March 2023 to increase 24.1% and 17.8% year-over-year to $1.09 and $7.07 billion, respectively. It surpassed revenue estimates in three out of the trailing four quarters.
The stock has gained 10.2% over the past month and 56.3% over the past six months to close the last trading session at $155.32.
NVO’s POWR Ratings reflect its fundamental strength. The company has an overall A rating, 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.
It has an A grade for Quality and a B for Stability and Sentiment. NVO tops the 168-stock Medical – Pharmaceuticals industry.
Click here for additional ratings for NVO’s Growth, Value, and Momentum.
Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, manufactures, and markets biopharmaceutical products globally. The company offers solutions for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.
In March, BMY announced that the European Commission (EC) had granted full Marketing Authorization for Reblozyl® (luspatercept) as a treatment for adult patients with anemia-associated, non-transfusion-dependent (NTD) beta-thalassemia.
On March 3, 2023, BMY’s board of directors declared a quarterly dividend of $0.57 per share, payable to stockholders on May 1, 2023. Its dividend of $2.28 per share translates to a 3.35% yield on current prices. Also, a quarterly dividend of $0.50 per share on the company’s $2.00 convertible preferred stock is payable to stockholders on June 1, 2023.
Its dividends have grown at 9.2% and 6.9% CAGRs over the past three and five years, respectively. BMY’s four-year average dividend yield is 3.02%. This reflects the company’s solid shareholder return ability.
BMY’s trailing-12-month EBITDA margin of 43.68% is significantly higher than the industry average of 3.17%. Its trailing-12-month ROCE, ROTC, and ROTA of 18.88%, 8.04%, and 6.53% compare to the industry averages of negative 39.46%, 21.84%, and 31.42%, respectively.
For the fiscal fourth quarter that ended December 31, 2022, BMY’s total revenue stood at $11.41 billion, while total in-line products and new product portfolio revenue increased 7.4% year-over-year to $8.97 billion. Non-GAAP net earnings attributable to BMY stood at $3.87 billion for the same quarter, and the non-GAAP earnings per share stood at $1.82.
Analysts expect BMY’s revenue for the fiscal second quarter ending June 2023 to increase marginally year-over-year to $11.96 billion. The company’s EPS for the same period is expected to grow 8.6% from the prior-year quarter to $2.10. Moreover, BMY surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
BMY’s stock has gained 1% over the past five days and marginally intraday to close the last trading session at $68.20.
BMY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
BMY also has an A grade for Value and a B for Growth, Stability, Sentiment, and Quality. It is ranked #2 in the same industry.
To see additional POWR Ratings for Momentum for BMY, click here.
Takeda Pharmaceutical Company Limited (TAK)
Headquartered in Japan, TAK researches, develops, manufactures, and sells pharmaceutical products, general medical products, quasi-drugs, and healthcare products globally. Its offerings are concentrated in the areas of gastroenterology, oncology, neuroscience, and rare diseases, as well as plasma-derived therapies and vaccines.
On March 27, TAK announced that the Japanese Ministry of Health, Labour and Welfare had approved the use of Entyvio® Pens for subcutaneous injection 108 mg / Syringes for SC injection 108 mg as maintenance therapy for moderate to severe ulcerative colitis.
On March 23, TAK announced that it would invest approximately ¥100 billion ($0.76 billion) to build a new manufacturing facility for Plasma-Derived Therapies (PDTs) in Osaka, Japan. This represents TAK’s largest-ever investment in manufacturing capacity expansion in Japan. This is anticipated to strengthen its ability to persistently and reliably bring high-quality PDTs to a growing number of patients worldwide.
TAK pays a $0.66 dividend annually, which yields 4% on the current price. It has a four-year average dividend yield of 4.27%. The company has grown its dividend payouts at a CAGR of 17.1% over the past three years.
TAK’s trailing-12-month EBITDA margin of 27.97% is 782.4% higher than the industry average of 3.17%. Its trailing-12-month ROCE, ROTC, and ROTA of 4.77%, 3.14%, and 2.03% compare to the industry average of negative 39.46%, 21.84%, and 31.42%, respectively.
For the nine months that ended December 31, 2022, TAK’s net revenue increased 13.9% year-over-year to ¥3.07 trillion ($23.47 billion). Operating profit amounted to ¥401.94 billion ($3.07 billion). The company’s net profit came in at ¥285.90 billion ($2.18 billion), up 18.4% year-over-year, while its EPS came in at ¥182.65, representing a rise of 19.4% year-over-year.
TAK’s revenue is expected to increase 415.2% year-over-year to $30.30 billion in the current fiscal year (ending March 2023). Its EPS is estimated to rise 37.6% year-over-year to $0.78 during the same quarter. The company surpassed the consensus revenue estimates in each of the trailing four quarters, which is excellent.
TAK has gained 6.8% over the past three months and 7.1% over the past month to close the last trading session at $16.44.
TAK’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Stability and a B for Growth. It is ranked #5 in the same industry.
In addition to the POWR Ratings stated above, one can see the TAK ratings for Momentum, Sentiment, and Quality here.
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NVO shares were trading at $156.51 per share on Wednesday morning, up $1.19 (+0.77%). Year-to-date, NVO has gained 16.31%, versus a 4.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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