Welcome to the Stock of the Day.
Wall Street may be jittery about a few emerging markets today, but today’s pullback represents an excellent buying opportunity while earnings season rolls on. Notably, Amgen (AMGN) just released earnings and I see an opportunity in the making here. Find out why.
Amgen is one of the oldest, biggest and best-established biotech companies. The company’s main products include some very successful drugs like Neulasta and Neupogen, which stimulate a type of white blood cell that helps fight infections; Enbrel, an inhibitor of tumor necrosis factor that plays a role in the body’s response to inflammatory diseases such as rheumatoid arthritis (RA) and psoriatic arthritis; and Aranesp and EPOGEN, which stimulate the production of red blood cells. The company is based in Thousand Oaks, California and employs 18,000 worldwide.
Amgen reported 13% annual sales growth and 30% earnings growth for the fourth quarter. Adjusted earnings were $1.82 per share, which beat the $1.69 consensus EPS estimate by 12%. Meanwhile, revenue rose to $5.01 billion, also topping analyst estimates of $4.81 billion in sales.
According to management, Neulasta, Neupogen and Enbrel continued to lead the way in terms of sales while six other drugs saw double-digit sales growth. The bulk of these sales came from the U.S. but the company also saw growth in Europe, a claim that not many of Amgen’s competitors can make.
Looking ahead to 2014, the company expects adjusted EPS between $7.90 and $8.20 on $19.4 billion in revenue. This translates to 3.9% annual sales growth and between 19% to 25% earnings growth. Meanwhile, the analyst community is calling for adjusted earnings of $8.17 per share on $19.51 billion in revenue.
So Amgen topped the Street view in terms of earnings projections but is slightly below the consensus sales forecast. I’m not overly concerned about this. Now that Amgen has acquired cancer drug specialist Onyx Pharmaceutical (ONXX), sales of Onyx’s myeloma drug Kyprolis alone are expected to add between $2 billion to $3 billion in annual sales.
All-in-all, this was a solid report.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. When it comes to Portfolio Grader ratings, you can hardly find a more consistent stock than AMGN. This Conservative-ranked stock has been in buy territory for the past year.That’s due to a combination of strong financial health (B-rated Fundamental Grade) and excellent institutional buying pressure (A-rated Quantitative Grade).
Breaking down the companys’ financials, AMGN receives B-ratings for five of the eight metrics I graded it on, including sales growth, earnings growth and return on equity. The only areas of improvement are Amgen’s operating margin growth and analyst earnings revisions (both C-rated), but those grades may be revised once I plug in the latest quarterly results.
Bottom Line: As of this posting I consider AMGN a B-rated Buy.
Would you like to check the fundamentals backing up one of your stocks? For more stock grades, please visit my Portfolio Grader website!