Over the last year there have been many opportunities for investors within the pharmaceutical sector. That being said, growth and income investors should be pleased in the opportunity these four pharmaceutical companies offer investors not just in the second quarter, but for the long term as well.
Bristol-Myers Squibb (BMY): Founded in 1887 and based in New York City, BMY currently trades at a P/E ratio of 15.05 and yields 4.1% ($1.36), making the stock very inexpensive when compared to other drugmakers. Analysts expect BMY to earn $0.50/share on revenue of $4.49 billion dollars for the second quarter and $1.96/share on revenue of $17.92 billion dollars for the year.
BMY has beaten Street estimates three out of the last four quarters, and surpassed those three estimates by an average of 2.86%. Investors looking to establish a position should do so in a moderate fashion, acknowledging that not only are shares of BMY pretty cheap, but the company's dividend has increased each year since 2009.
Johnson & Johnson (JNJ): Founded in 1886 and based in Brunswick, N.J., JNJ currently trades at a P/E ratio of 17.09 and yields 3.9% ($2.44), making the stock very inexpensive when compared to several of its fellow Dow components. Analysts expect JNJ to earn $1.29/share on revenue of $16.69 billion dollars for the second quarter and $5.12/share on revenue of $66.47 billion dollars for the year.
Investors looking to establish a position in JNJ should do so with the intention of establishing a long-term position focused on both earnings growth and income potential. Currently paying an annual dividend of $2.44/share, JNJ has increased that dividend every year since 1970 and should continue to do so for years to come. I think JNJ should surpass estimates this quarter by roughly $0.03/share -- $0.05/share on revenue of at least $17.1 billion dollars.
Eli Lilly (LLY): Founded in 1876 and based in Indianapolis, Ind., LLY currently trades at a P/E ratio of 10.4 and yields 4.9% ($1.96), making the stock very inexpensive when compared to several of its pharmaceutical peers. Analysts expect LLY to earn $0.76/share on revenue of $5.57 billion dollars for the second quarter and $3.27/share on revenue of $22.68 billion dollars for the year.
For investors looking to establish a position in LLY, two things should be considered. First, the company currently yields 4.9% and trades at about $40/share, making one's long-term growth prospects from an income standpoint very bright. Second, LLY has surpassed earnings estimates in each of the last two quarters by an average of 12.65%, making the stock attractive to most growth investors as well. Second-quarter results should surpass analyst estimates by at least $0.04/share on revenue of $5.75 billion dollars or higher.
Merck (MRK): Founded in 1891 and based in Whitehouse Station, N.J., MRK currently trades at a P/E ratio of 16.72 and yields 4.5% ($1.68), making the stock affordable at these levels. Analysts expect MRK to earn $1.02/share on revenue of $12.2 billion dollars for the second quarter and $3.81/share on revenue of $47.14 billion dollars for the year.
Investors looking to establish a position in MRK should consider two things. Not only do the results of the company's Phase III trial for its insomnia drug, Suvorexant, sound promising, but the company has also surpassed analyst expectations by an average of 2.13% over the last three quarters. MRK should continue to surpass estimates during the second quarter as well. I'd begin by establishing a moderate-sized position and adding to that position as both dividend and earnings dates approach.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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