Amgen Inc. (AMGN) discovers, develops, manufactures, markets, and delivers human therapeutics worldwide. The company focuses on a wide range of areas, such as inflammation, oncology, cardiovascular disease, bone health, and neuroscience. It serves healthcare providers, including physicians and their clinics, dialysis centers, hospitals, and pharmacies.
The company has been delivering solid financial performance by serving patients globally with its diverse and growing portfolio of marketed medicines in large therapeutic categories. Its products include Enbrel to treat plaque psoriasis, rheumatoid arthritis, and psoriatic arthritis; Prolia to treat postmenopausal women with osteoporosis; Xgeva for skeletal-related events prevention; and KYPROLIS to treat relapsed multiple myeloma.
On October 20, AMGN completed its previously announced acquisition of ChemoCentryx, Inc. (CCXI), a biopharmaceutical company focused on orally-administered therapeutics to treat autoimmune diseases, inflammatory disorders, and cancer, for $52 per share in cash.
“ChemoCentryx enhances Amgen's leading inflammation and nephrology portfolio and includes TAVNEOS® (avacopan), a first-in-class treatment for severe active anti-neutrophil cytoplasmic autoantibody-associated vasculitis (ANCA-associated vasculitis), an autoimmune disease for which there remains a significant unmet medical need,” said Robert A. Bradway, Chairman, and CEO at Amgen.
Furthermore, on October 6, AMGN launched a new research and development site in San Francisco’s Oyster Point, strengthening its nearly two-decade presence in the region. The new R&D facility would focus on discovering therapeutics for patients living with cancer, inflammatory disease, and cardiometabolic disorders. This move is expected to boost AMGN’s future research and development ventures.
Morgan Stanley analyst Matthew Harrison recently upgraded AMGN from Equal Weight to Overweight and increased his 12-month price target for the stock from $257 to $279. The analyst considers AMGN a strong player in the volatile environment.
AMGN’s business model has proven resilient in all economic cycles and allowed the company to deliver attractive and sustainable returns to shareholders. AMGN has raised its dividend payments for 10 consecutive years. It pays a $7.76 per share dividend annually, which translates to a 2.98% yield on the current price. Its four-year dividend yield is 2.87%.
The company’s dividend payouts have grown at a CAGR of 10.2% over the past three years and 11.2% over the past five years.
AMGN has gained 14.9% over the past month and 25.2% over the past year to close the last trading session at $259.99.
Here is what could influence AMGN’s performance in the upcoming months:
Solid Financials
In the fiscal 2022 second quarter ended June 30, 2022, AMGN’s total product sales increased 3% year-over-year to $6.28 billion. The company reported a non-GAAP operating income of $3.34 billion, up 107.7% year-over-year. Its non-GAAP net income grew 145.3% from the year-ago value to $2.50 billion.
Furthermore, the company’s non-GAAP earnings per share came in at $4.65, up 162.7% year-over-year. It generated $1.70 billion of free cash flow for the second quarter.
Favorable Analyst Estimates
Analysts expect AMGN’s revenue for the fiscal 2023 first quarter (ending March 2023) to come in at $6.45 billion, indicating an increase of 3.3% from the prior-year period. The consensus EPS estimate of $4.61 for the same quarter indicates an increase of 8.6% year-over-year. Also, the company has topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.
In addition, the company’s revenue for the fiscal year 2023 (ending December 2023) is expected to rise 3.8% from the previous year to $27.13 billion. Analysts expect next year’s EPS to grow 7.8% year-over-year to $18.87.
High Profitability
AMGN’s trailing-12-month gross profit margin of 75.75% is 38.9% higher than the 54.55% industry average. Its trailing-12-month EBITDA margin of 49.95% is 1,435.7% higher than the 3.25% industry average. Also, the stock’s trailing-12-month net income margin of 24.92% compares to the industry average of negative 2.86%.
Moreover, AMGN’s trailing-12-month levered FCF margin of 32.04% compares to the industry average of negative 2.63%. Likewise, its trailing-12-month ROCE, ROTC, and ROTA of 123.31%, 15.57%, and 11.09% compare to the industry averages of negative 38.79%, 21.44%, and 29.59%, respectively.
Mixed Valuation
In terms of forward non-GAAP P/E, AMGN is currently trading at 14.86x, 21.3% lower than the industry average of 18.88x. The stock’s forward EV/EBITDA multiple of 10.47 is 19.9% lower than the industry average of 13.07. In addition, its forward EV/EBIT ratio of 16.98 compares with an industry average of 19.40.
However, in terms of forward EV/Sales, AMGN is currently trading at 6.47x, 76% higher than the industry average of 3.68x. Its forward Price/Sales multiple of 5.32 is 32.7% higher than the industry average of 4.39.
POWR Ratings Show Promise
AMGN has an overall B rating, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. AMGN has a B grade for Quality, in sync with its higher-than-industry profitability metrics.
AMGN is ranked #10 out of 380 stocks in the Biotech industry.
Beyond what I have stated above, we have also given AMGN grades for Sentiment, Growth, Value, Momentum, and Stability. Get access to all AMGN ratings here.
Bottom Line
Biopharmaceutical company AMGN is well-positioned to grow revenues and profit margins by focusing on innovative products and a growing biosimilar portfolio. Given its robust financials, higher-than-industry profitability, high-yield dividends, and promising growth prospects, we think it could be wise to invest in this stock now.
How Does Amgen Inc. (AMGN) Stack Up Against its Peers?
AMGN has an overall POWR Rating of B. One could also check out these other stocks within the Biotech industry with an A (Strong Buy) rating: Vertex Pharmaceuticals Inc. (VRTX), Biogen Inc. (BIIB), and United Therapeutics Corporation (UTHR).
AMGN shares rose $2.09 (+0.80%) in premarket trading Wednesday. Year-to-date, AMGN has gained 18.40%, versus a -18.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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