Stocks have climbed over the last few weeks, with the S&P 500 now up over 8% since May 13 and over 35% since the market’s March lows. The recent positivity, which has the S&P over 3,000 and the Dow above 25,000, comes as economies start to reopen around the world and U.S. states roll back coronavirus lockdown measures.
The recent protests and unrest did not deter investors, as of morning trading Monday. Last week’s U.S. jobless claims data highlighted the devastating impact the coronavirus is still having on the economy. The numbers are, however, trending downward and more businesses are reopening.
On top of that, the market could continue to climb on the back of the Fed’s massive support and the U.S. government’s moves to help boost the economy. And there are signs that the economic recovery could be quick (also read:
Three Reasons Why the Coronavirus Economic Recovery will be Quick).
With this in mind, let’s dive into three large-cap pharmaceutical and biotech stocks that appear set to grow during the pandemic-induced downturn and the eventual recovery…
Eli Lilly ( LLY Quick Quote LLY - Free Report)
Eli Lilly topped our Q1 earnings estimates in April, with quarterly revenue up 15%. LLY noted that many of its offerings launched since 2014, such as Trulicity, Emgality, and others, were key growth engines and sales contributors. CFO Josh Smile also said that momentum carried over from 2019 and was helped by “higher patient and supply chain purchasing due to the COVID-19 pandemic.” Along with this strength, Lilly announced Monday that “patients have been dosed in the world's first study of a potential antibody treatment designed to fight COVID-19.”
Clearly, it’s still early, but any coronavirus-focused drug could help boost the stock down the road. Investors should know that Lilly said last quarter it could face headwinds in the near-term because of “economic and healthcare consequences of this pandemic.” Nonetheless, Lilly’s portfolio of medicines includes treatments that focus on everything from diabetes to cancer and cardiovascular health and its stock price is up 16% in 2020, which crushes its industry’s 1% climb.
LLY shares are up 80% in the last two years—against its industry’s sideways movement—and rest 7% off their recent highs right now. Plus, Lilly trades at a discount against its industry in terms of forward 12-month Zacks earnings estimates and sits right at its own two-year median. The Indianapolis-based firm raised its current dividend payment by 15% from last year and its 1.95% yield tops the S&P 500.
Looking ahead, our Zacks estimates call for Lilly’s adjusted fiscal 2020 earnings to jump roughly 13%, with 2021 set to climb another 18% higher. And its revenue is projected to pop 7.2% and 6.2%, respectively during this stretch. Lilly’s longer-term earnings estimate positivity helps it earn a Zacks Rank #1 (Strong Buy) right now. LLY is also part of an industry that rests in the top 7% of our more than 250 Zacks industries.
AbbVie ( ABBV Quick Quote ABBV - Free Report)
AbbVie’s portfolio features one of the world’s top-selling drugs, Humira, and the company topped our Q1 earnings and revenue estimates on May 1. More importantly, the firm completed in early May its $63 billion acquisition of Allergan plc, following its final rounds of regulatory approval. The Allergan deal adds Botox and other beauty-focused drugs, as its patent protections for Humira run out. Luckily, Humira biosimilars aren’t due out in the U.S. for at least a few years and its expanded portfolio should help the company grow for years to come.
Investors should also note that AbbVie’s therapeutics span a wide variety of illnesses and it boasts a strong R&D pipeline. ABBV shares have jump over 40% since the market’s March 23 lows and is now up over 20% in the last 12 months, against its highly-ranked industry’s 9% climb.
AbbVie currently holds an “A” grade for Value in our Style Scores system. And the company's 5.16% dividend yield blows away Pfizer’s (
PFE Quick Quote PFE - Free Report) 4.32%, Merck’s ( MRK Quick Quote MRK - Free Report) 3.07%, and its industry’s 2.57% average.
Moving on, our Zacks estimates call for AbbVie’s revenue to jump 36.5% and 17.5%, respectively in fiscal 2020 and FY21, with strength driven by its Allergan deal. On the bottom end of the income statement, ABBV’s adjusted FY20 earnings are projected to jump 20% and another 12.3% higher next year. Plus, its longer-term earnings revisions activity helps it hold a Zacks Rank #1 (Strong Buy) at the moment.
Vertex ( VRTX Quick Quote VRTX - Free Report)
Vertex is a pharmaceutical company that focuses on cystic fibrosis, which is an inherited disorder that causes severe damage to the lungs and digestive system and can be life-threatening. Vertex has developed a suite of drug treatments for CF, which includes its “triple combination” therapy TRIKAFTA that was approved by the FDA in October 2019.
VRTX topped our Q1 earnings estimates at the end of April, with revenue up a whopping 77%, driven primarily by the "uptake of TRIKAFTA in the U.S. and the uptake of our medicines outside the U.S. following the completion of key reimbursement agreements in 2019.”
The company also raised its fiscal 2020 guidance for total CF product revenues. Plus, Vertex is expanding beyond CF. It has a non-CF pipeline of genetic and cell therapies for diseases such as sickle cell, beta thalassemia, Duchenne muscular dystrophy, and type 1 diabetes mellitus. VRTX is also working with CRISPR Therapeutics (
CRSP Quick Quote CRSP - Free Report) .
Vertex shares are up 30% in 2020 and over 70% in the last 12 months to rest right near its new highs. VRTX’s earnings revisions have climbed since its Q1 report, with its fiscal 2020 consensus estimate up 15%. This positivity helps Vertex hold a Zacks Rank #1 (Strong Buy), alongside its “A” grade for Growth and “Bs” for Momentum and Value.
Our estimates call for Vertex’s FY20 revenue to climb 37% to $5.71 billion, which would come on top of FY19’s 37% sales growth. And its adjusted FY20 earnings are projected to jump 65% to $8.80 a share.
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