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Amgen (NASDAQ:AMGN) discovers, develops, manufactures, and delivers innovative human therapeutics. A leader in biotechnology since 1980, Amgen was one of the first companies to realize the new science's promise by bringing safe, effective medicines from lab, to manufacturing plant, to patient.

Amgen was a sweetheart stock to many in the mid to late 90's, where it went from a stock that was under 10 dollars a share, to a 70 dollar stock in 2000. Amgen was heavy into research in the 1990's and for those years did not report positive earnings. When they reported positive earnings in 2003 and beyond, the stock has been pretty flat, with a peak of just over 80 bucks a share in late 2005.

What has changed from 2005 to today? Let's look below at the income statement and balance sheets:

INCOME STATEMENT: 10-YEAR SUMMARY

DATE

SALES

EBIT

DEPRECIATION

TOTAL NET
INCOME

EPS

TAX RATE
(%)

12/11

15.58 Bil

4.15 Bil

1.06 Bil

3.68 Bil

4.04

11.30

12/10

15.05 Bil

5.32 Bil

1.02 Bil

4.63 Bil

4.79

13.00

12/09

14.64 Bil

5.20 Bil

1.05 Bil

4.61 Bil

4.51

11.50

12/08

15.00 Bil

5.02 Bil

1.07 Bil

4.05 Bil

3.77

19.20

12/07

14.77 Bil

3.79 Bil

1.20 Bil

3.08 Bil

2.74

18.90

12/06

14.27 Bil

4.02 Bil

917.00 Mil

2.95 Bil

2.48

26.60

12/05

12.43 Bil

4.87 Bil

841.00 Mil

3.67 Bil

2.93

24.50

12/04

10.55 Bil

3.40 Bil

734.00 Mil

2.36 Bil

1.81

30.40

12/03

8.36 Bil

3.17 Bil

686.50 Mil

2.26 Bil

1.69

28.80

12/02

5.52 Bil

-684.50 Mil

447.30 Mil

-1.39 Bil

-1.21

0.00

BALANCE SHEET: 10 YEAR SUMMARY

DATE

CURRENT
ASSETS

CURRENT
LIABILITIES

LONG TERM
DEBT

SHARES
OUTSTANDING

12/11

48.87 Bil

29.84 Bil

21.34 Bil

795.60 Mil

12/10

43.49 Bil

19.54 Bil

10.87 Bil

932.10 Mil

12/09

39.63 Bil

16.96 Bil

10.60 Bil

995.00 Mil

12/08

36.43 Bil

15.54 Bil

8.35 Bil

1.05 Bil

12/07

34.64 Bil

16.77 Bil

9.18 Bil

1.09 Bil

12/06

33.79 Bil

14.82 Bil

7.21 Bil

1.17 Bil

12/05

29.30 Bil

8.85 Bil

3.96 Bil

1.22 Bil

12/04

29.22 Bil

9.52 Bil

3.94 Bil

1.26 Bil

12/03

26.11 Bil

6.72 Bil

3.08 Bil

1.28 Bil

12/02

24.46 Bil

6.17 Bil

3.05 Bil

1.29 Bil

Sales more or less have been the same for Amgen since 2006, plus or minus 1 billion dollars. The biggest thing to notice is that the shares of stock from 2006 to 2011 went from 1.17 billion to 795.6 million. This is roughly 375 million shares that Amgen has repurchased (bought back) in the last 5 years. During those 5 years, debt has increased by 14 billion, and liabilities have increased by 15 billion. For its most current buyback, Amgen borrowed money to repurchase shares at $60 a share, which was 5 dollars more than the going price when the buyback was announced. I don't believe this was a wise use of borrowed money. Lets take a look at the projected earnings for Amgen for 2012 and 2013.

  • 2012 EPS & Total Earnings: $5.93 $4.72 billion
  • 2013 EPS & Total Earnings: $6.47 $5.15 billion

For 2012, total earnings closely match 2009 and 2010 numbers. This is a time period where the stock sat somewhere in the 50-60 dollar range and made investors like myself mad, wondering where the growth is. The hoarded cash was just to buy back shares, not reinvested in the company or products, and not paid to stockholders, in the form of a one-time dividend, or dividends. Note: Amgen just paid their first dividend on February 13, 2012, so my statements are talking about the past.

Conclusion: Amgen is not growing at the rate that it may appear looking at basic EPS numbers and PE ratios. They are essentially holding steady, just with less shares of stock, more debt and more liabilities. Also, the real advantage that Amgen had in the 90s was their research department. They announced 380 layoffs in their R&D department in October. This is not a positive for a company that needs to create new drugs to make future profits. The only pathway for EPS gains in the future would be to buy out a smaller R&D drug company. My personal thought is that Amgen will reissue stock if they attempt to purchase another company like this or take one over, and this will actually decrease the share price below 2009 levels. At that point, this will be a company with higher debt, a poor P/E ratio, more shares of stock and less earnings than the company it was in years past. I owned Amgen in the past, but I won't be owning it again in the future.

Source: Amgen: Real Earnings Growth Or Just A Mirage?