Healthcare Business

Top Analyst Bullish on Big Pharmaceutical Stocks Before Q2 Earnings

Eli Lilly

This is another company with solid upside potential and a safer profile for investors. 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 stock remains a favorite, and the analysts said this in the research report:

Our price target assumes the stock trades at ~17.6x our 2019 estimated EPS. This reflects a premium to both the current and forward group average and the S&P forward P/E multiple. We think a premium to the group average multiple is justified given Lilly’s diversified volume-driven sales growth and operating leverage. Our price target is supported by a discounted cash flow (DCF) intrinsic value of >$100 per share.

Investors in Eli Lilly are paid a 2.52% dividend. The $101 SunTrust price target compares with the $92.47 analyst consensus target. The shares closed at $89.43 on Thursday.

Merck

This remains a leading health care stock for conservative investors. Merck & Co. Inc. (NYSE: MRK) offers therapeutic and preventive agents to treat cardiovascular issues, type 2 diabetes, asthma, nasal allergy symptoms, allergic rhinitis, chronic hepatitis C virus, HIV-1 infection, fungal infections, intra-abdominal infections, hypertension, arthritis and pain, inflammatory, osteoporosis, male pattern hair loss and fertility diseases.

The company also provides neuromuscular blocking agents for use in surgery, anti-bacterial products for skin and skin structure infections, cholesterol modifying medicines, non-sedating antihistamine and vaginal contraceptive products.

Merck also remains a good play for conservative accounts, the analyst said this about the company.

Our target price assumes Merck trades at ~16x our 2019 estimated EPS estimate, supported by a discounted cash flow (DCF) model. The ~16x multiple on 2019 estimated EPS is above the group average of ~12.5x, which we think is appropriate, given the company’s leadership in the Immuno-Oncology space and Keytruda’s first-mover advantage in 1 line non small cell lung cancer.

Merck shareholders receive a 3.07% dividend. SunTrust has set its price target at $74. The consensus target price is $69.44, and the shares closed Thursday at $62.51 apiece.

These are four top pharmaceutical stocks for investors to look at prior to reporting the second-quarter results next week. All have had solid price moves higher in 2018, so it may make sense to buy partial positions in front of the results just in case they miss the earnings mark or guidance is less than expected.