One thing that many on Wall Street felt was hampering the pharmaceutical and medical technology stocks was the potential for a Hillary Clinton victory last month. Her harsh rhetoric on drug pricing cast a pall over both areas and they each have suffered badly.
While Donald Trump’s victory would seem a positive for both, since November 8 the majority of the stocks in the Merrill Lynch med tech universe are down, and down big. We screened for the pharmaceutical and med tech companies that are Buy rated and pay the biggest dividends. With many stock investors looking for value, these could have big 2017 upside potential.
Shares of this top pharmaceutical stock with very solid growth potential are down over 15% from highs hit last summer. Abbott Laboratories (NYSE: ABT) is a leading diversified global health care company that develops, manufactures and markets branded generics, medical devices, nutritional products and diagnostic solutions.
The company recently agreed to acquire the equity in Minnesota-based Tendyne Holdings that it does not already own for $250 million plus future payments tied to regulatory milestones. Wall Street likes the purchase and the way the company is putting its substantial balance sheet to work.
The company also offers a diversified large cap play as earnings are split between five well-positioned business segments: Nutritionals (31% of revenues), Vascular (13%), Generic Pharmaceuticals (20%) and Diagnostics (25.5%) and Diabetes (10.5%).
Back in July, CEO Miles White, who has been at the firm for over three decades, bought a stunning $45.5 million worth of company stock, which added to his already substantial holdings. The purchase made him one of the top 100 shareholders.
Abbott Labs investors receive a 2.74% dividend. The Merrill Lynch price target for the stock is $50, and the Wall Street consensus target is $47.38. Shares closed Friday at $37.90.
This is another stock with substantial upside potential. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.
The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.
The company posted third-quarter sales and earnings well below Wall Street’s expectations, prompting shares to plummet to a four-month low before rebounding. The stock is down almost 10% on the year and offering investors an outstanding entry point. Top analysts on Wall Street are still very focused on the company’s outstanding late-stage product pipeline, which they and others on Wall Street view as very undervalued.
Recently the company announced a disappointing Phase 3 trial for its Alzheimer’s drug solanezumab, which missed the primary and secondary endpoints. While the analysts are forced to remove potential earnings from their model due to the failure, they remain positive on the stock based on “Underappreciated growth, driven by the diabetes base business, baricitinib and abemaciclib.” And the company got very good news Friday after the FDA approved another indication for the diabetes drug Jardiance.
Shareholders receive a 3.01% dividend. Merrill Lynch recently lowered its price objective to $90 from $105, The consensus price target is $85.38, and shares closed Friday at $67.71.
This stock is down a sharp 15% in less than a month. Medtronic PLC (NYSE: MDT) is a medical devices giant, and many on Wall Street saw its historical merger with Covidien, probably one of the largest in the med tech industry, as a momentous event, leading to the creation of a unique company that combines the extensive and innovative abilities of both companies. The combined company officially has joint forces of over 85,000 employees present in more than 160 countries.
Top analysts feel that the contributions from Medtronic’s three growth drivers, which they cite as therapy innovation, globalization and services/solutions, should support a 5% or greater constant currency top-line growth this year and beyond. Some also feel that the Covidien earnings potential is underappreciated, and the change in domicile is also a positive.
Medtronic investors receive a 2.4% dividend. Merrill Lynch has an $82 price target, and the consensus target is $85.50. Shares closed Friday at $72.01.
This stock is down almost 8% over the past month, though the company is a big beneficiary of an aging baby boomer population. Stryker Corp. (NYSE: SYK) is a medical technology company that operates in two business segments. Its orthopedic implants business produces implants used in joint replacement, trauma, spine and craniomaxillofacial procedures.
Stryker’s MedSurg segment produces surgical equipment (other than orthopedic hardware), as well patient handling and emergency medical equipment. The shares have witnessed an increase in activity from the world’s largest hedge funds, and that’s often a good indicator for investors.
Shareholders receive a 1.36% dividend. The $133 Merrill Lynch price objective compares with the consensus target of $127.14. The stock ended last week at $112.08.
These are stocks that make good sense for investors looking to add to their overall equity holdings. They are all trading well below their 52-week highs and should be attracting substantial institutional interest in 2017.