The pharmaceutical industry is expected to grow significantly as a result of global medical demands, aging population, technological advancements, and government investments in healthcare infrastructure, which will drive demand for pharmaceutical products and services.
The global pharmaceutical market is expected to reach $1.48 trillion by 2028, exhibiting a CAGR of 5.8%. Oncology Drugs is the industry’s largest segment, with an anticipated market volume of $188.20 billion in 2023.
The pharmaceutical sector is embracing Pharma 4.0 technology, which focuses on interconnectivity, big data analytics, AI, collaborative robotics, and distributed cloud-based service architectures. This shift aims towards connected, efficient, and agile production that saves time and money. The global pharma 4.0 market is expected to reach $63.17 billion by 2032, increasing at an 18% CAGR.
Investors’ interest in pharma stocks is evident from VanEck Vectors Pharmaceutical ETF’s (PPH) 8.7% returns over the past three months.
With these favorable trends in mind, let’s delve into the fundamentals of the three best Medical – Pharmaceuticals stocks, beginning with number 3.
Stock #3: 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.
JNJ has paid dividends for 60 consecutive years. Over the last three years, JNJ’s dividend payouts have grown at 5.8% CAGR. While JNJ’s four-year average dividend yield is 2.62%. Its forward annual dividend of $4.76 translates to a 2.97% yield.
JNJ’s trailing-12-month EBIT margin of 27.66% is significantly higher than the 0.15% industry average, while its trailing-12-month EBITDA margin of 35.09% is 571.3% higher than the industry average of 5.23%.
During the fiscal second quarter that ended July 2, 2023, JNJ’s sales to customers increased 6.3% year-over-year to $25.53 billion. Its gross profit grew 7.6% from the same period in the prior year to $17.32 billion. The company’s adjusted net earnings amounted to $7.36 billion, while its adjusted EPS came in at $2.80, representing a 6.5% and 8.1% increase year-over-year.
JNJ’s revenue is expected to increase by 3.8% year-over-year to $87.78 billion for the year ending December 2024. Its EPS is expected to grow 8.8% year-over-year to $10.92 for the same period. It surpassed EPS estimates in all four trailing quarters. JNJ’s shares have gained 5.2% over the past six months to close the last trading session at $160.48.
JNJ’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JNJ has a B grade for Growth, Stability, and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #9 out of 159 stocks. Click here for the additional POWR Ratings for Value, Sentiment and Momentum for JNJ.
Stock #2: AstraZeneca PLC (AZN)
Headquartered in Cambridge, the United Kingdom, AZN is a renowned biopharmaceutical company focusing on discovering, developing, manufacturing, and commercializing prescription medicines. Its marketed products treat oncology, covid-19, respiratory, cardiovascular, renal, and metabolism diseases, etc.
AZN has paid dividends for 24 consecutive years. Over the last three years, AZN’s dividend payouts have grown at 1.18% CAGR. While AZN’s four-year average dividend yield is 2.50%. Its forward annual dividend of $0.93 translates to a 1.36% yield.
AZN’s trailing-12-month EBITDA margin of 39.59% is 657.3% higher than the industry average of 5.23%. Its trailing-12-month EBIT margin of 28.91% is significantly higher than the industry average of 0.15%.
AZN’s total revenues increased 6% year-over-year to $11.42 billion for the second quarter (ended June 30, 2023), while its operating profit grew 355.7% from the year-ago value to $2.46 billion. The company’s profit after tax and EPS increased 405.6% and 408.7% from the prior-year quarter to $1.82 billion and $1.17, respectively.
Street expects AZN’s revenue to increase 3.2% year-over-year to $45.79 billion for the year ending December 2023. Its EPS is expected to grow 10.2% year-over-year to $3.67 for the same period. It surpassed EPS estimates in three of four tailing quarters. Over the past year, the stock has gained 10.3% to close the last trading session at $68.14.
AZN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #6 in the same industry. It has an A grade for Growth and a B for Stability and Quality. To see additional AZN’s rating for Value, Sentiment and Momentum, click here.
Stock #1: Dr. Reddy’s Laboratories Limited (RDY)
Headquartered in Hyderabad, India, RDY operates as an integrated pharmaceutical company through four distinct segments: Global Generics; Pharmaceutical Services & Active Ingredients (PSAI); Proprietary Products and Others.
On August 10, 2023, RDY announced the launch of Saxagliptin and Metformin Hydrochloride Extended-Release Tablets in the United States, a therapeutic comparable generic version of the FDA-approved KOMBIGLYZE® XR tablets. This is good news for the company.
RDY has paid dividends for 22 consecutive years. Over the last three years, RDY’s dividend payouts have grown at 13.1% CAGR. While RDY’s four-year average dividend yield is 0.60%. Its forward annual dividend of $0.48 translates to a 0.71% yield.
RDY’s trailing-12-month EBIT and levered FCF margins of 23.57% and 11.21% are significantly higher than the industry averages of 0.15% and 0.22%, respectively.
In the fiscal first quarter that ended June 30, 2023, RDY’s revenues increased 29.1% year-over-year to $821 million, while its gross profit improved by 52.1% from the year-ago value to $482 million. The company’s profit for the period improved by 17.9% from the prior-year quarter to $171 million, while its earnings per share stood at $1.03, up 18.4% year-over-year.
Analysts expect RDY’s revenue to increase 9.2% year-over-year to $3.29 billion for the year ending March 2024. Its EPS is expected to grow 3.4% year-over-year to $3.46 for the same period. It has surpassed EPS estimates in all four trailing quarters. Over the past year the stock has gained 28.3% to close the last trading session at $68.04.
RDY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system. It has a B grade for Value, Stability, Sentiment and Quality. It is ranked #5 in the same industry.
Beyond what is stated above, we’ve also rated RDY for Growth and Momentum. Get all RDY ratings here.
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JNJ shares were trading at $160.48 per share on Monday afternoon, down $1.20 (-0.74%). Year-to-date, JNJ has declined -7.14%, versus a 18.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
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, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.3 Pharma Stocks to Consider Prescribing to for Quality appeared first on StockNews.com