The pharma industry has been in the limelight since the onset of the COVID-19 pandemic as several companies raced to develop an effective vaccine. With multiple vaccines currently available in the market, companies are now expanding their production capacities to meet the global demand because several countries, particularly developing ones, are still grappling with the new strains of the virus and their governments are placing a priority on vaccinating their populations.
A revival of economic and industrial activities and bullish markets have shifted investor focus from pharma companies, however. This is evidenced by the SPDR Biotech ETF’s (XBI) 5% decline year-to-date compared to the benchmark S&P 500’s 13.2% gains over this period.
Given the huge demand for COVID-19 vaccines, we think pharma companies Johnson & Johnson (JNJ) and Pfizer Inc. (PFE) should generate substantial revenues and earnings soon. Thus, we think the industry’s current dip provides a perfect opportunity to invest in these stocks.
Click here to checkout our Healthcare Sector Report for 2021
Johnson & Johnson (JNJ)
New Brunswick, New Jersey-based JNJ is an established pharma company that researches and develops, manufactures and sells a range of healthcare products. The company operates through three segments: consumer, pharmaceutical and medical Devices.
On June 21, the company added its Enseal X1 Curved Jaw Tissue Sealer to its Advanced Biopolar Energy Portfolio. This demonstrates JNJ’s innovative prowess and growth potential.
On April 23, JNJ resumed its COVID-19 vaccine roll out for all adults in the United States. This should contribute significantly to the company’s revenues in the coming quarters as the country races to vaccinate its entire population.
JNJ’s sales increased 7.9% year-over-year to $22.32 billion in the fiscal first quarter, ended March 31. Its gross profit grew 12% from its year-ago value to $15.26 billion, while its net income improved 6.9% year-over-year to $6.20 billion. The company’s EPS increased 12.6% year-over-year to $2.59.
Analysts expect JNJ’s revenues to increase 26% year-over-year to $22.19 billion in the current quarter, ending June 2021. A $2.26 consensus EPS estimate for the current quarter represents a 35.3% rise from the same period last year. Furthermore, JNJ surpassed the Street’s EPS estimates in each of the trailing four quarters.
Shares of JNJ have gained 14.1% over the past year, and 4% year-to-date. However, the stock has declined 4.3% over the past month to close yesterday’s trading session at $163.62.
It is no surprise that JNJ has an overall rating of A, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Stability, and a grade B for Value, Growth, Quality and Sentiment. Among the 226 stocks in the Medical - Pharmaceuticals industry, JNJ is ranked #1. To see more of JNJ’s component grades, click here.
Pfizer Inc. (PFE)
PFE is a biopharmaceutical company based in New York that discovers, develops and manufactures healthcare products and vaccines. The Company operates through two business segments: Pfizer Innovative Health (IH) and Pfizer Essential Health (EH).
On May 20, PFE and BioNTech SE (BNTX) announced their agreement with the European Union to supply up to 1.80 billion additional doses of COVID-19 vaccine COMIRNATY®. In May, the vaccine received positive opinion from the EU regarding the use of the vaccine on the adolescent population in the European Union also. This rising demand should allow PFE to witness significant revenue growth in the near term.
On May 10, PFE announced that its COVID-19 vaccine received Emergency Use Authorization (EUA) to be used in the 12 to 15 age group in the United States. As the first COVID-19 vaccine for this age group in the United States, PFE will secure a first mover advantage.
PFE’s revenue increased 45% year-over-year to $14.58 billion in the fiscal first quarter, ended March 31. Its income from continuing operations grew 96% from its year-ago value to $4.88 billion. The company’s EPS increased 44% year-over-year to $0.86.
A $19.04 billion consensus revenue estimate for its fiscal second quarter (ending June 2021) indicates a 64.8% increase year-over-year. The Street expects the company’s EPS to rise 29.5% from the prior year quarter to $1.01 in the current quarter. PFE has an impressive earnings surprise history as well; it beat consensus EPS estimates in three of trailing four quarters.
PFE has gained 19.6% over the past year. The stock has gained 7.6% year-to-date. However, it declined marginally over the past month to close yesterday’s trading session at $39.61.
PFE has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. PFE has a B grade for Growth, Value, Stability, Sentiment, and Quality. It is ranked #3 in the Medical - Pharmaceuticals industry. Click here to view additional PFE Ratings.
Click here to checkout our Healthcare Sector Report for 2021
JNJ shares were unchanged in after-hours trading Wednesday. Year-to-date, JNJ has gained 4.63%, versus a 13.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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