Follow The Leader: 3 Biopharma Stocks Displaying Relative Strength
3 Biopharma Stocks Displaying Relative Strength Heading Into 2022
Follow the leader.
We’ve all played this game at some point in our lives. The popular children’s game helps teach our kids to be patient and listen to directions. It also sharpens their observational skills as they must mimic the actions of the leader.
As investors we want to be in leading stocks. The problem for most investors is that they fail to notice the relevant signs and distinctions from the leaders. They are too busy holding on to former losers hoping to break even, and refuse to recognize the buy signals that leading stocks are demonstrating under the surface. These investors often pay too much attention to the financial news media, who are usually wrong and don’t normally invest in the stocks they tout on TV.
The best investors exemplify the skills we teach to our young people. They are extremely patient and wait for proper entry points. They know what to look for in terms of price patterns, sector rotation, and relative strength. These investors have built a process over time that enables them to identify leading stocks at any given point in time.
Here at Zacks we give you the tools to help identify leading stocks and outperform the market. Our Zacks Industry Rank identifies the top industry groups that contain market leaders, providing a tailwind to your investing success. Our Zacks Rank methodology pinpoints stocks that are witnessing positive earnings estimate revision activity, allowing investors to jump on board before an emerging rally gets underway. And our Earnings ESP filter empowers investors by allowing them the opportunity to detect stocks that are most likely to beat consensus estimates.
These are just a select few of the benefits available to Zacks’ subscribers. Our Zacks Style Scores and Premium Screeners also assist investors in narrowing down the investable universe to only the top names. That’s the key – we only want to include the best of the best in our portfolio, which will allow us to maximize our investing potential.
Let’s discuss three biopharmaceutical stocks that are displaying recent relative strength. These stocks have led the major indexes this year and are showing signs of continued outperformance.
Gilead Sciences, Inc. (GILD)
Gilead Sciences is a global, research-based biopharmaceutical company that discovers, develops, and commercializes innovative medicines. GILD strives to transform and simplify care for people with life-threatening illnesses, including treatments for HIV/AIDS, liver disease, cancer, inflammatory and respiratory diseases, and cardiovascular conditions. Founded in 1987 and headquartered in Foster City, CA, Gilead Sciences has collaboration agreements with other biopharma giants including Bristol-Myers Squibb, Merck, and several other companies.
GILD has built a strong portfolio including but not limited to hepatitis C virus drugs, HIV/AIDS therapies, breast cancer drugs, as well as their COVID-19 treatment (remdesivir). The company’s diversified product pipeline bodes well for long-term growth. Gilead is also making headway in the oncology space with strategic acquisitions such as Immunomedics in 2020.
GILD has averaged a positive earnings surprise of 15.79% over the four quarters. The company most recently reported EPS in October of $2.65, a +54.07% surprise over consensus. Trading at a relatively undervalued 9.04 forward P/E, GILD is showing relative strength as we head into the new year. The stock is up over 31% in 2021 and is currently hitting a 52-week high. New highs are bullish for investors.
Gilead Sciences, Inc. Price, Consensus and EPS Surprise
What the Zacks Model Reveals
The Zacks Earnings ESP (Expected Surprise Prediction) looks to find companies that have recently seen positive earnings estimate revision activity. This more recent information can be a better predictor of the future, which can give investors a leg up during earnings season. The technique has proven to be quite useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time.
GILD sports a Zacks #2 Buy ranking and an Earnings ESP of +24.48%. The recent trend of earnings beats looks set to continue. The Zacks Consensus Estimate for 2021 EPS stands at $8.07, representing a 13.82% growth rate compared to 2020. GILD is due to report earnings on February 3rd, 2022.
Regeneron Pharmaceuticals, Inc. (REGN)
Regeneron Pharmaceuticals is a biopharmaceutical company that invents, develops, manufactures and commercializes therapeutic medicines for the treatment of severe medical conditions. REGN has developed therapeutic candidates for the potential treatment of obesity, rheumatoid arthritis, cancer, and asthma. Founded in 1988 and headquartered in Tarrytown, NY, REGN has established collaboration and license agreements with companies such as Sanofi, Bayer, Roche Pharmaceuticals, as well as an agreement with the U.S. Department of Health and Human Services.
REGN’s key growth driver is Eylea, its treatment for neovascular age-related macular degeneration as well as diabetic macular edema. Growth in the U.S. markets is being driven by demographic trends with an aging population and an overall increase in the prevalence of diabetes. REGN has seen an incremental contribution from its REGEN-COV virus treatment which has boosted revenues significantly. We expect sales to continue their recent trend as the pandemic lingers on.
Trading at a vastly undervalued 8.99 forward P/E, Regeneron has surpassed earnings estimates in each of the past ten quarters. The company has delivered a trailing four-quarter average earnings surprise of +28.93%. REGN most recently announced EPS in November of $15.37, a positive 56.68% surprise over estimates. The stock has risen in tune with these earnings beats, advancing nearly 34% this year.
Regeneron Pharmaceuticals, Inc. Price, Consensus and EPS Surprise
Analysts covering REGN have increased their full-year earnings estimates by 11.53% in the past 60 days. The Zacks Consensus Estimate for 2021 EPS now stands at $71 – a phenomenal 125.61% growth rate relative to last year. REGN is slated for its next quarterly earnings report on February 4th, 2022.
Avid Bioservices, Inc. (CDMO)
Avid Bioservices is a contract development and manufacturing organization, providing clinical and commercial manufacturing services focused on biopharmaceutical drugs derived from mammalian cell culture. Founded in 1981 and headquartered in Tustin, CA, CDMO also offers process development activities such as cell line optimization and product characterization.
A Zacks #1 Strong Buy stock, CDMO has exceeded earnings estimates in each of the past five quarters, with an average beat of 316.67% over the past year. The company most recently reported EPS earlier this month of $0.07, an astounding 800% positive surprise over consensus. This trend of earnings beats has supported CDMO stock’s climb of nearly 160% this year.
Avid Bioservices, Inc. Price, Consensus and EPS Surprise
Analysts have upped their estimates for fiscal 2022 EPS by 8% in just the past thirty days. The Zacks Consensus Estimate now sits at $0.27, translating to 350% growth relative to 2020. CDMO is scheduled to report earnings on March 14th.
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