Yesterday’s pleasantly surprising CPI data, along with the WPI data released earlier, may have strengthened the case for slower interest rate hikes by the Fed from this month onwards. However, the gap between the current inflation rate and the 2% inflation rate targeted by the Federal Reserve suggests there may be a long way to go before an eventual pivot by the central bank.
Furthermore, with the economy refusing to cool down fast enough, as evidenced by the latest employment data, Fed officials may not be willing to take their foot off the brakes prematurely. Hence, market stability in the foreseeable future may be wishful thinking at best.
However, fundamentally strong businesses with stable and growing demand for their products are well-positioned to deliver market-beating returns, regardless of macroeconomic conditions. Hence, it could be wise to invest in Bristol-Myers Squibb Company (BMY) and McKesson Corporation (MCK), which are expected to keep generating alpha well into the year ahead.
Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, manufactures, and markets biopharmaceutical products globally. The company offers solutions for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and Covid-19 diseases.
On December 8, BMY declared a quarterly dividend of $0.57 per share, payable on February 1, 2023, to stockholders of record at the close of business on January 6, 2023. This represents an increase of 5.6% over its previous quarterly dividend rate of $0.54 per share and the fourteenth consecutive fiscal year that the company has increased its dividend.
BMY pays $2.28 annually as dividends, translating to a yield of 2.95% at the current price, and its dividend payouts have grown at 6.7% CAGR over the past five years.
On October 31, BMY announced positive topline results of the Phase 3 COMMANDS trial. With this, the company is one step closer to addressing a significant need for new and better first-line treatment options for patients with transfusion-dependent myelodysplastic syndromes (MDS).
On October 26, BMY announced new retrospective analyses on serologic responses and clinical outcomes with COVID-19 vaccination in participants treated with Zeposia (ozanimod) from the ongoing Phase 3 DAYBREAK open-label extension (OLE) study in relapsing multiple sclerosis (MS). All adverse events related to COVID-19 in vaccinated study participants were nonserious.
For the third quarter of fiscal 2022 ended September 30, BMY’s total in-line products and new product portfolio revenue increased 8% year-over-year to $8.62 billion. The company reported net earnings attributable to BMY of $1.60 billion, up 6.7% year-over-year.
The non-GAAP EPS attributable to BMY increased 3.1% year-over-year to $1.99.
Analysts expect BMY’s revenue for the fiscal year (ending December 2023) to increase 2.7% year-over-year to $47.11 billion. The company’s EPS for the same period is expected to grow 4.3% from the previous year to $7.95. Moreover, BMY’s impressive earnings surprise history has seen it surpass the consensus EPS estimates in each of the trailing four quarters.
BMY’s stock has gained 0.5% over the past month and 25% year-to-date to close the last trading session at $77.35.
BMY’s POWR Ratings reflect this promising outlook. The company’s overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BMY also has an A grade for Value and a B for Stability, Sentiment, and Quality. It is ranked #2 of 160 stocks in the Medical – Pharmaceuticals industry. To see additional POWR Ratings for Growth and Momentum for BMY, click here.
McKesson Corporation (MCK)
MCK is a diversified healthcare service provider focusing on advancing patients’ health outcomes globally. The company operates through four segments: U.S. Pharmaceutical, Prescription Technology Solutions (RxTS), Medical-Surgical Solutions, and International.
On October 27, MCK announced a regular quarterly dividend of $0.54 per share of common stock, payable on January 3, 2023. The company pays $2.16 annually as dividends, which translates to a yield of 0.58% at the current price. It has increased its dividend payouts for 15 consecutive years.
On September 29, MCK announced that it had extended its pharmaceutical distribution agreement with CVS Health (CVS) through June 2027. MCK and CVS have been partnering to develop patient value propositions for over 20 years.
On September 19, MCK signed a definitive agreement to acquire Rx Savings Solutions (RxSS), a prescription price transparency and benefit insight company. The acquisition, valued at a maximum of $875 million, aligns with McKesson’s strategic growth focus by connecting biopharma and payer services to patients.
In the fiscal 2022 second quarter ended September 30, 2022, MCK’s total revenues increased 5.4% year-over-year to $70.16 billion. During the same period, its income from continuing operations increased 249.1% year-over-year to $932 million, while EPS increased 277.8% year-over-year to $6.46.
Analysts expect MCK to report revenue and EPS of $275.87 billion and $24.74 for the fiscal year ending March 2023, indicating increases of 4.5% and 4.4% year-over-year, respectively.
MCK’s stock has gained 1.7% over the past month. Compared to the S&P 500’s decline of 16.2%, it has gained 49.6% year-to-date to close the last trading session at $371.09.
MCK has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. It also has an A grade for Growth and grade B for Value, Stability, and Quality.
Unsurprisingly, MCK tops the list of 79 stocks in the Medical – Services industry. Click here to see the additional ratings of MCK’s Momentum and Sentiment.
BMY shares were trading at $76.98 per share on Wednesday afternoon, down $0.37 (-0.48%). Year-to-date, BMY has gained 27.30%, versus a -15.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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