The central bank has now hiked its policy rate from near-zero to the 3-3.25% range and signals larger increases going forward. The consecutive rate hikes are raising the odds of a recession. “There’s a likelihood that the Fed with further rate hikes pushes the economy into a recession in order to bring inflation down,” said Jason Pride, chief investment officer for private wealth at Glenmede in Philadelphia.
However, the unemployment rate declined to 3.5% in September, while payrolls increased by 263,000, indicating a strong job market. The report “really just shows that the consumer and corporate side have been very resilient despite the headwinds of the Russia-Ukraine war, rising interest rates, and slowing housing market,” said Jeffrey Roach, chief economist at LPL Financial.
Healthcare stocks have always been considered a safe haven amid market uncertainties. Thus, we think fundamentally sound stocks AbbVie Inc. (ABBV), Pfizer Inc. (PFE), and McKesson Corporation (MCK) might be great buy and hold options.
AbbVie Inc. (ABBV)
ABBV, a biopharmaceutical research company; is involved in the research, development, manufacturing, commercialization, and sale of medicines and therapies. In addition, it has a research collaboration with Dragonfly Therapeutics, Inc.
On September 27, ABBV announced the availability of the XEN® 63 Gel Implant, a minimally invasive, micro-incisional glaucoma surgery intended to reduce intraocular pressure (IOP) in patients with primary open-angle glaucoma. This should help the company provide innovative treatment for glaucoma patients.
In the same month, ABBV reported that the CMHP recommended the approval of Skyrizi (risankizumab), the first and only specific interleukin-23 inhibitor, for the treatment of adults with moderately to severely active Crohn’s disease (CD).
The approval is backed up by three pivotal Phase 3 trials in which Skyrizi significantly outperformed the placebo as both an induction and maintenance therapy for clinical remission and endoscopic response.
During the second quarter ended June 30, 2022, ABBV’s net revenue increased 4.5% year-over-year to $14.58 billion. Its operating earnings came in at $3.29 billion. The company’s net earnings grew 20.6% from the year-ago value to $924 million, while its adjusted EPS grew 11.3% from the prior-year quarter to $3.37.
Analysts expect ABBV’s revenues and EPS to rise 5.1% and 9.1% year-over-year to $59.01 billion and $13.86, respectively, in fiscal 2022.
The stock has gained 28.3% over the past year to close the last trading session at $140.29.
ABBV’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to a Strong Buy in our proprietary POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ABBV also has an A grade for Quality and a B for Growth and Value. Within the Medical – Pharmaceuticals industry, it is ranked #8 of 164 stocks.
To see additional POWR Ratings for Sentiment, Momentum, and Stability for ABBV, click here.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. The company serves wholesalers, retailers, hospitals, clinics, government agencies, as well as disease control and prevention centers.
On October 5, PFE announced the completion of its acquisition of Global Blood Therapeutics, Inc. (GBT), a biopharmaceutical company involved in the discovery, development, and delivery of life-changing treatments for patients with sickle cell disease (SCD). This acquisition reinforces PFE’s commitment to SCD and gives the potential to address critical needs.
In the same month, PFE acquired Biohaven Pharmaceutical Holding Company Ltd., the maker of NURTEC® ODT (rimegepant), an innovative migraine therapy approved for both acute treatment and prevention of episodic migraine in adults. This should expand the company’s calcitonin gene-related peptide portfolio and better serve the needs of millions of migraine patients worldwide.
PFE’s revenue increased 46.8% year-over-year to $27.74 billion in the second quarter ended July 3. Its income from continuing operations grew 69.6% from the year-ago value to $9.88 billion, while its adjusted income improved 93.5% year-over-year to $11.66 billion. The company’s adjusted earnings per common share increased 92.5% from its year-ago value to $2.04.
Street EPS estimate of $1.35 for the fourth fiscal quarter ending December 2022 indicates a 24.9% improvement year-over-year. Analysts expect its revenue to rise 3.7% year-over-year to $24.71 billion for the same quarter.
The stock has gained 2.6% over the past year to close the last trading session at $43.09.
It’s no surprise that PFE has an overall A rating which translates to a Strong Buy in our POWR Ratings system.
PFE is rated an A in Value and a B in Quality. In the same industry, it is ranked #12.
Click here to access additional POWR Ratings for Growth, Momentum, Sentiment, and Stability for PFE.
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 September 29, MCK announced its agreement to extend its long-standing partnership with CVS Health Corporation (CVS) to distribute pharmaceuticals to mail-order and specialty pharmacies, retail pharmacies, and distribution centers through June 2027. This should continue to be strategically beneficial for the company.
In the fiscal 2023 first quarter ended June 30, 2022, MCK’s total revenues increased 7.2% year-over-year to $67.15 billion. Income from continuing operations attributable to MCK during the quarter increased 56.6% year-over-year to $766 million, while the net income attributable to MCK increased 58% from the year-ago value to $768 million.
Additionally, the company reported an adjusted EPS of $5.83 for the quarter, registering an increase of 4.9% year-over-year.
Analysts expect MCK to report revenue and EPS of $276.48 billion and $24.33 for the fiscal year ending March 2023, registering an increase of 4.7% and 2.7% year-over-year, respectively.
Over the past year, the stock has gained 77% to close the last trading session at $350.89. It gained 41.2% year-to-date.
MCK’s POWR Ratings reflect its impressive growth prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It also has an A grade for Growth and a B for Value, Stability, and Sentiment. Within the Medical – Services industry, it is ranked first out of the 81 stocks.
To see the ratings of MCK for Momentum and Quality, click here.
ABBV shares were trading at $139.23 per share on Friday afternoon, down $1.06 (-0.76%). Year-to-date, ABBV has gained 5.76%, versus a -22.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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