The pharmaceutical industry has seen steady growth amid the pandemic. Moreover, with increasing demand, increasing investment in research and development, and growing e-pharmacy channels, the industry is well positioned for significant growth in the coming years. Therefore, investors could consider buying fundamentally sound pharma stocks Johnson & Johnson ( JNJ ), AbbVie ( ABBV ), and Novartis ( NVS ), which look poised to deliver solid earnings in 2023. Continue reading.
The pharmaceutical industry has been in the spotlight in recent years due to the pandemic, as companies have rushed to develop treatments and vaccines. In addition, the industry has seen significant growth in various areas over the past decade, aided by research and development.
According to an estimate by the IQVIA Institute, total spending and global demand for drugs could reach $1.90 trillion over the next five years. Vaccines will boost the pharmaceutical market to $500 billion by 2027.
“Covid-19 continues to impact pharmaceutical markets globally and is estimated to continue to expand the pharmaceutical market through 2027, primarily due to vaccines,” said Murray Aitken, senior vice president and executive director of the IQVIA Institute for Human Data Science. .
Moreover, amid rapid digitization, the global e-pharmacy industry is expected to grow at a CAGR of 14.2% through 2028. Investor interest in pharmaceutical stocks is evident from the 4% returns of the SPDR S&P Pharmaceuticals ETF (XPH) over the last nine months.
Given the backdrop, investors could consider buying fundamentally sound pharmaceutical stocks Johnson & Johnson ( JNJ ), AbbVie Inc . (ABBV) and Novartis AG (NVS) in 2023.
Johnson & Johnson (JNJ)
JNJ and its subsidiaries research, develop, manufacture and sell various healthcare products worldwide. The company operates through three divisions: Consumer Health; Pharmaceutical; and Medical Devices.
JNJ’s gross profit margin of 67.94% is 22.3% higher than the industry average of 55.55%, while its EBITDA margin of 34.34% is 821.7% higher than the industry average of 3.73 %.
JNJ has paid dividends for 60 consecutive years. Over the past three years, JNJ’s dividend payouts have grown at a 6% CAGR. While JNJ’s four-year average dividend yield is 2.60%, its current dividend translates to a yield of 2.84%.
JNJ’s consumer health segment revenue was $3.77 billion for the fourth quarter of fiscal 2022, up marginally from a year earlier. Additionally, its adjusted net income came in at $6.22 billion, representing a 9.5% year-over-year increase. Its EPS rose 10.3% year over year to $2.35.
JNJ’s revenue is expected to grow 3.1% YoY to $97.85B in 2023. Its EPS is expected to grow 3.5% YoY to $10.51 in 2023. Beat EPS Estimates and in the last four quarters. Shares of JNJ fell marginally intraday to close the last session at $158.24.
JNJ’s POWR ratings reflect this promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. POWR ratings evaluate stocks against 118 different factors, each with its own weighting.
JNJ is graded A for stability and quality and B for value. In the Medical-Pharmaceutical industry, it is ranked #7 out of 174 stocks. Click here for additional POWR sentiment, growth and momentum ratings for JNJ.
AbbVie Inc. (ABBV)
The biopharmaceutical company ABBV is active in the research, development, production, commercialization and sale of medicines worldwide. The company’s products are classified in Immunology. Oncology? Anesthetics? Neuroscience? Eye care? Women’s health? and others.
On January 10, 2023, ABBV and Anima Biotech collaborated to discover and develop mRNA biology modulators for three targets in oncology and immunology.
The agreement will provide ABBV with access to Anima’s superior technology platform and deep understanding of mRNA biology, enhancing its world-class drug discovery and development capabilities.
ABBV’s gross profit margin of 71.47% is 28.7% higher than the industry average of 55.55%, while its EBITDA margin of 53.54% is significantly higher than the industry average of 3.73%.
ABBV has paid dividends for nine consecutive years. Over the past three years, ABBV’s dividend payouts have grown at a 9.2% CAGR. While ABBV’s four-year average dividend yield is 4.60%, the current dividend translates to a yield of 3.96%.
ABBV’s net income was $15.12 billion for the fourth quarter ended December 31, 2022, up marginally from a year earlier. Its operating profit rose 8.4% year over year to $5.50 billion. Additionally, its total operating costs and expenses fell marginally year over year to $9.61 billion.
The Street expects ABBV’s revenue to grow marginally on a year-over-year basis to $52.63 billion in 2024. Its EPS is expected to be $11.06 in 2024. It has beaten EPS estimates in each of the last four quarters. Over the past six months, the stock gained 4.9% to close the last session at $149.53.
ABBV has an overall rating of B, which is equivalent to a Buy in the POWR rating system. It is graded A for quality and B for stability. ABBV ranks #12 in the same industry. To view additional POWR ratings for ABBV (Value, Sentiment, Momentum and Growth), click here.
Novartis AG (NVS)
Headquartered in Basel, Switzerland, NVS researches, develops, manufactures and markets healthcare products worldwide. The company operates through two divisions, Innovative Medicines and Sandoz.
On February 6, 2023, Sandoz, a division of NVS and a global leader in off-patent medicines, announced that the US Food and Drug Administration (FDA) had accepted the Biologics License Application (BLA) for a planned biosimilar denosumab for the treatment a variety of disorders, including postmenopausal osteoporosis.
The company is building a biosimilar portfolio to provide patients with access to high-quality treatments and increase the sustainability of the healthcare system.
NVS’s gross profit margin of 70.90% is 27.6% higher than the industry average of 55.55%, while its EBITDA margin of 34.74% is 823.4% higher than the industry average 3, 73%.
NVS has paid dividends for 25 consecutive years. Over the past three years, NVS’s dividend payouts have grown at a 5.5% CAGR. While NVS’s four-year average dividend yield is 3.58%, the current dividend translates to a yield of 4.04%.
NVS’ core operating income was $4.03 billion for the fourth quarter ended December 31, 2022, an increase of 5.5% year over year. Its underlying net income rose 3.7% year over year to $3.25 billion. Additionally, its core EPS rose 8.6% year over year to $1.52.
NVS’s revenue is expected to grow 3.4% YoY to $52.26 billion in 2023, while its EPS is expected to grow 7.2% YoY to $6.56. It beat EPS estimates in all four trailing quarters. The stock gained 2.9% over three months to close the last session at $85.96.
Not surprisingly, NVS has an overall rating of A, which equates to a strong buy in the POWR rating system. It is graded A for stability and B for Value, Emotion and Quality. Ranked #3 in the same industry.
In addition to what’s mentioned above, we’ve also rated NVS for Momentum and Growth. Get all NVS ratings here.
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Shares of JNJ were up $0.29 (+0.18%) in premarket trading on Friday. Year-to-date, JNJ has fallen -10.42%, versus a 6.76% rise in the benchmark S&P 500 over the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master’s degree in commerce, he aspires to make complex financial issues understandable for individual investors and help them make the right investment decisions.
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