The stock market and the economy endured a challenging 2022 with several challenges, such as high inflation, rising interest rates, supply chain disruptions, and geopolitical issues.
Although inflation is showing signs of easing, the Federal Reserve remains committed to bringing inflation down to its desired 2% target. Therefore, a pause in rate hikes is highly unlikely this year.
This is expected to keep the economy and the stock market under pressure. Therefore, it could be wise to cushion one’s portfolios by adding high-yield dividend stock Gilead Sciences, Inc. (GILD).
Healthcare major GILD has been a solid dividend payer. It has raised dividends for seven consecutive years. The company paid a quarterly dividend of $0.73 on December 29, 2022. Its annual dividend of $2.92 yields 3.51% on the current share price. It has a four-year average yield of 4%. Its dividend payouts have increased at a 5% CAGR over the past three years and a 7% CAGR over the past five years.
GILD gained popularity during the pandemic by developing the first antiviral drug approved to treat COVID-19. GILD’s revenue and EPS in the fiscal third quarter of 2022 were higher than analyst estimates. Its EPS was 32.9% higher than the consensus estimate, while its revenue beat analyst estimates by 14.8%.
GILD’s Chairman and CEO, Daniel O’Day, said, “This was another very strong quarter across the business. In HIV, treatment and prevention markets continue to grow with further share gains for Biktarvy in treatment, and we received our first approval for our long-acting HIV agent, lenacapavir, in Europe.”
The company raised its guidance for fiscal 2022. It now expects total product sales between $25.90 billion and $26.20 billion, up from the previously expected range of $24.50 billion to $25 billion. Its non-GAAP EPS is expected to come between $6.95 and $7.15, up from the $6.35 to $6.75 range expected earlier.
Here’s what could influence GILD’s performance in the upcoming months:
Strategic Agreement
On January 3, 2023, GILD and EVOQ Therapeutics, Inc. announced a collaboration and licensing agreement. Under the agreement, GILD would receive the rights to exclusively license EVOQ’s NanoDisc technology to develop and commercialize EVOQ’s proprietary technology for treating rheumatoid arthritis and lupus.
Robust Financials
GILD’s HIV product sales increased 7% year-over-year to $4.49 billion for the third quarter ended September 30, 2022. Its total product sales, excluding Veklury, increased 11% year-over-year to $6.05 billion. Also, its oncology sales rose 79% from the prior-year period to $578 million.
Discounted Valuation
GILD’s forward non-GAAP P/E of 11.71x is 42.7% lower than the 20.44x industry average. Its forward EV/EBITDA of 8.84x is 35.8% lower than the 13.77x industry average. Also, the stock's 3.93x forward P/S is 16.9% lower than the 4.74x industry average.
High Profitability
In terms of the trailing-12-month gross profit margin, GILD’s 79.22% is 43.3% higher than the 55.29% industry average. Likewise, its 47.08% trailing-12-month EBITDA margin is significantly higher than the industry average of 3.73%. Furthermore, the stock’s 0.42% trailing-12-month asset turnover ratio is 22.9% higher than the industry average of 0.34%.
POWR Ratings Show Promise
GILD has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. GILD has an A grade for Value, in sync with its discounted valuation.
It has a B grade for Quality, consistent with its high profitability.
GILD is ranked #4 out of 399 stocks in the Biotech industry. Click here to access GILD’s Growth, Momentum, Stability, and Sentiment ratings.
Bottom Line
Despite the uncertain macroeconomic conditions, GILD has raised its guidance for fiscal 2022 based on solid demand for its therapies. The Sunlenca (Lenacapavir) drug holds immense promise for the company as it is expected to generate significant revenues, being the first and only approved Capsid Inhibitor-based HIV treatment option. With many analysts expecting an economic slowdown this year, investors could benefit from GILD’s impressive dividend yield.
GILD’s strong product pipeline, strategic acquisitions, collaborations, and drug approvals are expected to drive its growth in the long term. Given its robust financials, high profitability, solid dividend payouts, and discounted valuation, it could be wise to buy the stock now.
How Does Gilead Sciences, Inc. (GILD) Stack up Against Its Peers?
GILD has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Biotech industry with an A (Strong Buy) rating: United Therapeutics Corporation (UTHR), Vertex Pharmaceuticals Incorporated (VRTX), and Biogen Inc. (BIIB).
GILD shares were trading at $82.70 per share on Tuesday morning, down $0.53 (-0.64%). Year-to-date, GILD has declined -3.67%, versus a 4.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
1 High-Yield Dividend Stock You Can Count on in 2023 StockNews.com
