The pharmaceutical industry is evolving with personalized medicines and the rapid adoption of RPM technology, which should boost growth. Moreover, with a recession lurking, fundamentally strong pharma stocks AstraZeneca (AZN) and Bristol-Myers Squibb (BMY) might be ideal buys. However, SNDL (SNDL) might be best avoided. Keep reading to know why.
The use of cutting-edge digital platforms, big data analytics, cloud computing, and artificial intelligence (AI) is transforming the pharmaceutical sector. Moreover, with looming recession fears, investing in the pharmaceutical industry could be ideal, thanks to the inelastic demand for its products and services.
I think quality pharma stocks AstraZeneca PLC (AZN) and Bristol-Myers Squibb Company (BMY) can help hedge against market uncertainties. However, SNDL Inc. (SNDL) might not be worth owning. In this piece, I will discuss these stocks in detail.
The healthcare industry is being revolutionized with modern technologies. Moreover, the growing market for personalized medicine is a significant growth driver for the industry. The global personalized medicine market is expected to expand at a CAGR of 7% from 2022 to 2030.
Furthermore, the US health systems and hospitals are rapidly shifting to remote patient monitoring (RPM) technology to improve outcomes and reduce costs. According to Research and Markets, the global RPM systems market is projected to be worth over $1.7 billion by 2027, up nearly 128% from the $745.7 million opportunity the market currently represents.
Stocks to Buy:
AstraZeneca PLC (AZN)
Headquartered in Cambridge, the United Kingdom, AZN is a biopharmaceutical company that develops, manufactures, and markets pharmaceutical products. It serves primary care and specialty care physicians through distributors and local representatives.
On February 2, 2023, AZN and Amgen Inc.’s (AMGN) TEZSPIRE was approved in the US for self-administration in a pre-filled, single-use pen for patients aged 12 years and older with severe asthma.
TEZSPIRE is the only biologic licensed for severe asthma that does not have any phenotypic or biomarker restrictions in its approved label.1. This should assist AZN in meeting the unmet needs of asthma patients.
AZN’s trailing-12-month gross profit and EBITDA margins of 80.57% and 31.33% are 43.9% and 738.1% higher than the respective industry averages of 55.99% and 3.74%.
On February 9, AZN announced a quarterly dividend of $0.99 per share, payable on March 27, 2023. The company has paid dividends for 23 consecutive years.
While AZN’s four-year average dividend yield is 2.68%, its annual dividend of $1.97 translates to a 3.02% yield on the current market price. AZN has paid dividends for 23 consecutive years. AZN’s dividend payouts have grown at a 1.9% CAGR over the last three years.
During the fiscal 2022 fourth quarter that ended December 31, 2022, AZN’s gross profit increased 12.5% year-over-year to $8.31 billion. Its profit for the period came in at $902 million, compared to a loss of $346 million in the previous-year quarter.
Also, its EPS came in at $0.58, compared to a loss per share of $0.22 in the previous-year quarter. The company reported an EBITDA of $2.57 billion, representing a rise of 35.5% from the prior-year quarter.
Street expects AZN’s revenue to rise 3.6% year-over-year to $45.96 billion in the current fiscal year, 2023. Its EPS is estimated to increase 39.6% year-over-year to $4.65 in the current year. AZN has surpassed the consensus revenue estimates in three of the trailing four quarters, which is impressive.
Over the past six months, the stock has gained 5.5% to close the last trading session at $65.21. It has a 24-month beta of 0.20.
AZN’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has a B grade for Growth, Stability, Sentiment, and Quality. The stock is ranked #9 in the 172-stock Medical – Pharmaceuticals industry.
Beyond what is stated above, we’ve also rated AZN for Value and Momentum. Get all AZN ratings here.
Bristol-Myers Squibb Company (BMY)
BMY is a biopharmaceutical company offering pharmaceutical products for treating hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and COVID-19 diseases.
On February 28, BMY announced that the U.S. Food and Drug Administration (FDA) had accepted the supplemental Biologics License Application (sBLA) and the European Medicines Agency (EMA) had validated the Type II Variation Marketing Authorization Application (MAA) for Opdivo (nivolumab) as monotherapy in the adjuvant setting for the treatment of patients with completely resected stage IIB or IIC melanoma.
Gina Fusaro, PhD, vice president and development program lead of BMY, said, “The data from the CheckMate -76K trial demonstrate the benefit that Opdivo can have for patients with this earlier stage of cancer. We look forward to working with the U.S. Food and Drug Administration and the European Medicines Agency to potentially offer a treatment option to patients with stage IIB or IIC melanoma that could help prevent recurrence.”
BMY’s trailing-12-month EBITDA margin of 43.68% is significantly higher than the 3.74% industry average. Its trailing-12-month gross profit margin of 78.81% is 40.8% higher than its industry average of 55.99%.
BMY’s four-year average dividend yield is 3.02%, and its forward annual dividend of $2.28 translates to a 3.31% yield on current prices. Its dividend payouts have grown at 9.2% and 6.9% CAGRs over the past three and five years, respectively.
BMY’s U.S. revenues increased 5.4% from the prior-year period to 7.93 billion in the fiscal fourth quarter, which ended December 31, 2022. Its total in-line products and new product portfolio revenue increased 7.4% year-over-year to $8.97 billion.
Also, its total expenses decreased 5.7% year-over-year to $9.55 billion, while its non-GAAP EPS stood at $1.82. Non-GAAP net earnings attributable to BMY stood at $3.87 billion.
BMY’s revenue is expected to rise marginally year-over-year to $11.95 billion for the fiscal second quarter ending June 2023. The company’s EPS is expected to rise 8.8% year-over-year to $2.10 for the same quarter. Additionally, the company has an impressive earnings surprise history, as it has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
The stock gained marginally intraday to close the last trading session at $69.36. It has a 24-month beta of 0.28.
It is no surprise that BMY has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.
It has an A grade for Value and a B for Stability, Growth, Sentiment, and Quality. It is ranked #2 in the same industry.
In addition to the POWR Ratings highlighted, one can access BMY’s rating for Momentum here.
Stock to Avoid:
SNDL Inc. (SNDL)
Headquartered in Calgary, Canada, SNDL engages in the production, distribution, and sale of cannabis products. It operates through the Cannabis Operations and Retail Operations segments. The company focuses on production and sale of cannabis-derivative pharma products.
SNDL’s trailing-12-month gross profit margin is 19.07%, which is 65.9% lower than the 55.99% industry average. Its trailing-12-month CAPEX/Sales of 1.51% is 67.4% lower than the 4.62x industry average.
During the third quarter ending September 30, 2022, SNDL’s loss from operations rose 365% year-over-year to CAD88.54 million ($65.04 million). Its net loss came in at CAD98.84 million ($72.60 million) compared to a net income of CAD16.71 million ($12.27 million) in the same quarter the prior year.
Also, its loss per share amounted to CAD0.41, compared to an EPS of CAD0.08 in the prior-year quarter.
Analysts expect SNDL’s EPS to decline 19% year-over-year to negative $0.65 in the fiscal year 2022. The company missed EPS estimates in each of the trailing four quarters, which is disappointing.
Over the past nine months, the stock has lost 51.5% to close the last trading session at $1.82. It has declined 21.9% over the past month. Its 24-month beta is 1.52.
SNDL’s weak fundamentals are reflected in its POWR ratings. The stock has an overall D rating, which equates to a Sell in our proprietary rating system.
The stock has an F grade for Momentum and Stability and a D for Sentiment and Quality. It is ranked #134 in the same industry.
Click here to access additional SNDL ratings for Growth and Value.
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AZN shares were unchanged in premarket trading Thursday. Year-to-date, AZN has declined -2.45%, versus a 3.22% 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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