Thanks to positive market sentiment, even the most beaten-up healthcare stocks are starting to rebound. In the past month, investors started accumulating these healthcare names. If you want to get in on this action, what should you be looking for? Well, low price-to-earnings multiples, manageable debt and an expanding pipeline are three characteristics that value investors should demand.
With that in mind, here are three healthcare stocks on the mend that investors should consider.
Healthcare Stocks to Buy: Teva Pharmaceutical (TEVA)
Teva Pharmaceutical (NYSE:TEVA) bottomed between August and October, at the height of investor pessimism for drug stocks. On Nov. 7, the company good reported third-quarter results. This demonstrates that CEO Kåre Schultz is repeating his successful approach in turning around companies. By the numbers, Teva announced earnings per share of 58 cents. Revenue fell just 6% year-over-year to $4.3 billion.
The company generated positive free cash flow of $550 million in the period. Generic revenue topped $914 billion, supported by 39 launches. Revenue from the drug Austedo grew to $105 million. And in other exciting news for Teva, the U.S. Food and Drug Administration approved Truxima to be the first U.S. biosimilar to Rituxan, which is used in treatments for non-Hodgkin’s lymphoma. This drug, breaking major ground, just launched Nov. 11.
Teva forecasts a $3 billion reduction in spending within two years. This means that as net debt falls, investors will start to confidently accumulate TEVA stock.
Endo International (ENDP)
Endo International (NASDAQ:ENDP) posted Q3 earnings per share of 60 cents. Revenue is starting to stabilize, falling 2.2% year-over-year to $729.4 million. CEO Paul Campanelli’s retirement announcement is a turning point for the company. Under his leadership, Endo simplified its business, drove productivity improvements and leveraged its culture as a differentiator.
But Endo’s branded pharmaceuticals division continued to demonstrate strong growth. Its specialty portfolio grew 18% while the sterile injectables unit grew 11% year-over-year. The company’s Xiaflex, Vasostrict and Aplisol led the strong performance.
Looking ahead, Endo expects its fiscal year 2019 specialty products unit to increase from the low double-digit range. This is because sales of Xiaflex will come to 20%, up from the previously forecast mid- to high-teens range.
The company forecast revenue for FY 2019 of $2.86 billion to $2.89 billion, with adjusted EBITDA of $1.26 billion to $1.30 billion. Additionally, Endo predicts diluted net income per share between $2.10-$2.25.
Endo International has a good infrastructure in place to support its specialty unit. But as it recruits staff to add to its sales force, it will leverage its scalable infrastructure.
Gilead Sciences (GILD)
Stuck in a narrow trading range between $62 and $67 throughout the year, Gilead Sciences (NASDAQ:GILD) stock is the best stock to own. Plus, the stock pays a 63 cent quarterly dividend, yielding close to 4%. GILD stock trades ex-dividend on Dec. 12.
In the third quarter, Biktarvy, a treatment for individuals with HIV-1, offset the impact of products that lost exclusivity. HIV product sales reached an all-time high quarterly revenue of $4.2 billion. Looking ahead, its Descovy was approved in the U.S. It also filed for approval of filgotinib in treating rheumatoid arthritis in the European Union and Japan. Gilead is looking to expand that approval, anticipating completing its filing in the U.S. by the end of this year.
Although product sales of drugs designed to treat viral hepatitis fell 25%, Gilead reduced the cost of goods sold by 2%. Despite these falling sales, research expenses rose, suggesting that the company is continuing to invest in drug development and support. GILD stock is on the mend because revenue declines are slowing. So, as total product sales continue growing, higher gross margin, price hikes and strategic promotional expenses will drive profits higher.
Additionally, Gilead’s Kite division, which specializes in cell therapy, will present data of its ongoing clinical trials at the American Society of Hematology meeting. Ahead of this Dec. 7-10 meeting, GILD stock may trade higher as it continues to mend.
As of this writing, Chris Lau did not hold a position in any of the aforementioned securities.
