Despite the muddled economic outlook and ongoing market volatility, healthcare stocks seem appealing to investors because of the inelastic demand for healthcare products, rising investments in this space, and consistent technological advancements. In addition, the aging population and rising demand for effective, cutting-edge treatments for chronic and new diseases should fuel the sector's growth.
Moreover, the convenience of remote services has also led to a boom in the digital health industry. Investors’ interest in the healthcare industry is evident from the Vanguard Health Care ETF's (VHT) 6.5% returns over the past three months.
Thus, it could be wise to invest in quality healthcare stocks Pfizer Inc. (PFE), Merck & Co., Inc. (MRK), and Bristol-Myers Squibb Company (BMY).
Pfizer Inc. (PFE)
PFE is a well-known biopharmaceutical product developer and distributor of medications, vaccines, and other therapies. Pfizer gained popularity among investors after the breakthrough in countering the Covid-19 pandemic through its Covid-19 vaccine developed in collaboration with BioNTech SE (BNTX).
This month, PFE announced that its investigational Group B Streptococcus (GBS) vaccine candidate, GBS6 or PF-06760805, has received Breakthrough Therapy Designation from the US Food and Drug Administration.
Also, this month, FDA and EMA accepted the regulatory submission of PFE’s Ritlecitinib for Individuals 12 years and older with Alopecia Areata. The FDA is expected to make a decision in the second quarter of 2023, while the European Medicines Agency (EMA) accepted the Marketing Authorization Application, with a decision expected in the fourth quarter of 2024.
PFE’s revenue increased 46.8% year-over-year to $27.74 billion for the second quarter ended July 30, 2022. Its net income improved 78% year-over-year to $9.91 billion. The company’s EPS increased 77% from the year-ago value to $1.73.
Its EPS is expected to grow 12.3% year-over-year to $1.51 in the current quarter ending September 2022. The stock has gained 3.5% over the past year to close its last trading session at $45.44.
PFE’s POWR Ratings reflect a promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
PFE has also rated an A grade for Value and a B for Quality and Sentiment. Within the F-rated Medical – Pharmaceuticals industry, it is ranked #8 of 166 stocks.
To see additional POWR Ratings for Growth, Stability, and Momentum for PFE, click here.
Merck & Co., Inc. (MRK)
Merck & Co., Inc. is a global healthcare corporation. It operates in two segments: Pharmaceutical and Animal Health. Furthermore, the company has collaborations with AstraZeneca PLC, Bayer AG, Eisai Co., Ltd., Ridgeback Biotherapeutics, and Gilead Sciences, Inc. to develop and commercialize long-acting HIV treatments jointly.
This month, MRK announced that Health Canada had approved KEYTRUDA (pembrolizumab), Merck's anti-PD-1 therapy, for the adjuvant treatment of adult and pediatric (12 years and older) patients with stage IIB or IIC melanoma following complete resection.
For the second quarter ended June 30, 2022, MRK’s net revenue grew 28% year-over-year to $14.59 billion. The company’s non-GAAP net income increased 204.2% from the prior quarter to $4.74 billion, while its non-GAAP EPS amounted to $1.87.
Analysts expect its EPS to grow 22.7% year-over-year to $7.38 in fiscal 2022. In addition, its revenue is expected to grow 20.3% from the prior-year quarter to $58.60 billion in the current year. The company’s shares have gained 20.8% over the past year and 13.1% year-to-date.
It is no surprise that MRK has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has a B grade for Growth, Value, and Sentiment. In the same industry, it is ranked #2.
In addition to the POWR Ratings grades I have just highlighted, you can see the MRK ratings for Momentum, Stability, and Quality here.
Bristol-Myers Squibb Company (BMY)
BMY discovers, develops, licenses, manufactures, and markets biopharmaceutical products globally. It provides products for hematology, oncology, cardiovascular, immunology, fibrotic, neuroscience, and Covid-19 diseases.
This month, The European Commission (EC) approved the fixed-dose combination of Opdualag (nivolumab and relatlimab) for the first-line treatment of advanced (unresectable or metastatic) melanoma in adults and adolescents 12 years of age and older with tumor cell PD-L1 expression of 1%.
Also, this month, BMY announced that the U.S. Food and Drug Administration (USFDA) approved Sotyktu (deucravacitinib), a first-in-class, oral, selective, allosteric tyrosine kinase 2 (TYK2) inhibitor, for the treatment of adults with moderate-to-severe plaque psoriasis who are candidates for systemic therapy or phototherapy.
During the second quarter ended June 30, 2022, BMY’s revenue increased 1.6% year-over-year to $11.89 billion. Its total expenses decreased 2.2% year-over-year to $9.93 billion. The company’s non-GAAP net profit surged 13.5% from the prior-year quarter to $4.2 billion, while its non-GAAP EPS grew 18.4% year-over-year to $0.66.
Streets expect BMY’s EPS and revenue to grow 6.7% and 3.4%, respectively, in the fiscal year 2023.
The company’s shares have gained 12.6% year-to-date and 14.5% over the one year.
BMY’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. BMY also has an A grade for Value and a B for Sentiment and Quality. The stock is ranked #3 in the same industry.
Beyond the POWR Ratings grades I have just highlighted, you can see the BMY ratings for Stability, Growth, and Momentum.
PFE shares were trading at $44.72 per share on Tuesday afternoon, down $0.72 (-1.58%). Year-to-date, PFE has declined -22.47%, versus a -18.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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