Drug manufacturing stocks have been major outperformers over the past couple of months. These stocks tend to outperform when yields are falling, and growth expectations are declining as their revenues are less economically sensitive.
These stocks also tend to pay above-average dividends and increase share buybacks when rates are low. Additionally, over the long-term, they will continue to compound as the aging population all over the world ensures that demand will increase.
Two of the top stocks in the sector are Abbvie (ABBV) and Teva Pharmaceutical Industries (TEVA).
ABBV
ABBV is one of the world’s leading pharmaceutical companies. The company vaulted to the top of the pharma industry after acquiring Allergan, a Botox maker, in the spring of ’20. The acquisition of Allergan added another revenue stream aside from ABBV’s flagship product of Humira.
ABBV has an A POWR Rating grade. This grade indicates the stock has a Strong Buy rating. ABBV has Bs in the Sentiment, Value and Growth components of the POWR Ratings. You can learn more about ABBV's grades in the rest of the POWR Ratings components such as Momentum, Quality and Stability by clicking here.
ABBV is ranked in the top 10 of the 220 stocks in the Medical - Pharmaceuticals space. If you are interested in finding more about the stocks in this sector, you can do so by clicking here.
ABBV has a forward P/E ratio of 9.17. This ratio indicates the stock is undervalued at $116.41 per share. ABBV's 52-week high is $119.15. The stock is currently trading at $116 and change. ABBV has a low beta of 0.82 so it probably won't fluctuate too much should the market get rocky.
TEVA
Based in Israel, TEVA is a worldwide pharmaceutical powerhouse that develops, makes and markets drugs. TEVA makes both generic and branded drugs along with active pharmaceutical ingredients, commonly referred to as APIs. TEVA sells its medications throughout North America, Latin America, Europe, Israel and India. These medications treat physical health maladies ranging from migraine headaches to Huntington’s disease, respiratory system issues and plenty more.
TEVA has a C POWR Rating grade. The stock has Ds in the Momentum and Sentiment components of the POWR Ratings. TEVA has an A Value component grade yet it has a C Quality component grade. Click here to find out how TEVA fares in the remainder of the POWR Ratings components such as Stability and Growth.
A total of 220 stocks are in the Medical - Pharmaceuticals industry. TEVA is ranked in the top 15%, slotting in at 33rd. You can find out more about the stocks in this space by clicking here.
The top analysts believe TEVA is headed higher. These market experts insist TEVA will hit their average price target of $11.41 per share. If TEVA reaches this price, it will have increased by more than 27% in value.
TEVA CEO Kare Schultz has led the company since late '17. The hope is that Schultz will complete TEVA's turnaround. The new CEO has decreased the company's operating expenses by more than $3 billion. Schultz has also reduced TEVA's net debt from $34 billion down to $24 billion. Investors will be happy to know Schultz intends to reduce TEVA's debt all the way down to $15 billion or less by '23, making the company's balance sheet that much more respectable.
Which is the Better Choice?
ABBV has an A POWR Rating grade. TEVA has a C grade. ABBV is ranked in the top 5% of its space. TEVA is ranked more than 20 spots lower than ABBV in the sector.
It is clear ABBV is the better of these two drug manufacturer stocks. Investors who already own ABBV should consider adding to their position. Those who do not yet own ABBV should further explore the stock and consider investing, especially if it moves lower due to market uncertainty resulting from coronavirus variants.
ABBV shares fell $0.11 (-0.10%) in premarket trading Friday. Year-to-date, ABBV has gained 11.13%, versus a 18.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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