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Health Care / Pharma Stocks 8-28-15

Health Care / Pharma Stocks 8-28-15

Yield in the spreadsheet below is based on the Q3-15 dividend. Spreadsheet header abbreviations: Div = dividend; EPS = earnings per share; LTM = last twelve months; YTD = year to date. The dividend to EPS ratio is a measure of dividend safety. At this point in time, companies that pay dividends once per year have had their payouts divided by four and encoded in this data as if they paid a quarterly dividend. AZN pays two unidentical dividends per year. I take the sum of those dividends and divide by four to get a run rate dividend per quarter. GILD's first dividend was in Q2-15. SNY was added when AGN was dropped. My sources did not agree on SNY's historical earnings data. The last four columns measure the percentage change in the 2015 EPS projection; the change in the price target since the beginning of the year; the change in the dividend since Q3-14; and the average yearly change in the dividend since Q3-12. BAX spun off its biopharmaceuticals business to form Baxalta (BXLT), while maintaining a 19.5% interest in BXLT. Each BAX share received one BXLT share. BXLT began trading on 7-01-15 at $32.88 while BAX went from a $69.93 close to a $37.55 open. This is treated as a 1.841 to one stock split - which would imply a $37.98 open. (All historical prices and EPS numbers were divided by 1.841) The dividend went from $0.52 to $0.28246. 2015 EPS went from $3.95 to $1.33 - to $1.29 on 7-31-15 (which still looks wrong compared to the $1.13 annual dividend - the prior div/EPS ratio was 53%) while BXLT began with a 2015 projection of $1.93 (still the same on 7-17). The 2016 EPS went from $4.06 to $1.48 while BXLT began at $1.97 - and it is now $2.01. BAX went from an unadjusted $4.90/share 2014 EPS to an adjusted $2.66. And that is still twice the 2015 projection. In summation, the BAX numbers are flakey. There may be future adjustments. That transaction may explain the lack of LTM dividend growth for BAX. AZN had a two for one stock split on 7-27-15 - and that change is not yet reflected in the data.


    Div Current Div/ Div/ Percent Change
Company and ticker Price /Quarter Yield EPS15 EPS16 Price Pr+Div EPS15 Target Div 1yr Div 3yr

Agilent Technologies (NYSE:A) 36.51 0.100 1.10 23.5% 20.3% -10.82 -10.09 -2.30 4.65 5.93 11.99
AbbVie Inc. (NYSE:ABBV) 63.98 0.510 3.19 47.9% 40.6% -2.23 0.11 -0.93 9.57 21.43 na
AmerisourceBergen Corporation (NYSE:ABC) 100.87 0.290 1.15 23.3% 20.8% 11.88 12.84 11.94 32.17 23.40 32.28
Abbott Laboratories (NYSE:ABT) 46.02 0.240 2.09 44.2% 39.7% 2.22 3.82 -3.98 19.83 9.09 7.87
Amgen Inc. (NASDAQ:AMGN) 155.89 0.790 2.03 32.4% 29.5% -2.13 -1.14 4.73 10.02 29.51 29.95
AstraZeneca PLC (NYSE:AZN) 63.34 0.700 4.42 65.7% 69.0% -10.00 -8.01 0.95 -3.82 0.00 0.00
Baxter International Inc. (NYSE:BAX) 38.75 0.282 2.92 85.6% 79.6% -2.66 -1.24 -48.44 -2.35 0.00 5.00
Bayer AG (OTCPK:BAYRY) 136.02 0.638 1.88 32.5% 29.3% -8.48 -6.76 4.94 11.52 -11.55 21.34
CR Bard Inc. (NYSE:BCR) 197.47 0.240 0.49 10.6% 9.6% 18.52 18.91 -1.63 24.76 9.09 6.28
Becton, Dickinson and Company (NYSE:BDX) 142.83 0.600 1.68 33.8% 28.5% 2.64 3.50 4.41 12.48 10.09 10.06
Bristol-Myers Squibb Company (NYSE:BMY) 60.61 0.370 2.44 80.4% 66.1% 2.68 4.56 2.22 23.23 2.78 2.86
Cardinal Health, Inc. (NYSE:CAH) 83.39 0.387 1.86 31.0% 26.9% 3.29 4.73 17.37 13.10 12.83 17.78
Quest Diagnostics (NYSE:DGX) 68.89 0.380 2.21 31.9% 29.7% 2.73 4.43 8.68 16.36 15.15 33.87
Gilead Sciences Inc. (NASDAQ:GILD) 107.78 0.430 1.60 14.7% 14.8% 14.34 14.80 18.32 3.26 0.00 na
GlaxoSmithKline PLC (NYSE:GSK) 41.25 0.592 5.74 103.9% 85.8% -3.49 1.39 -23.49 -2.84 -8.64 4.42
Johnson & Johnson (NYSE:JNJ) 95.17 0.750 3.15 48.6% 46.9% -8.99 -7.55 0.00 0.74 7.14 7.13
Eli Lilly and Company (NYSE:LLY) 83.19 0.500 2.40 61.0% 55.9% 20.58 22.03 2.18 32.85 2.04 0.68
McKesson Corporation (NYSE:MCK) 200.80 0.280 0.56 8.8% 7.7% -3.27 -3.03 17.64 13.67 16.67 12.22
Medtronic Inc. (NYSE:MDT) 73.56 0.380 2.07 34.8% 31.4% 1.18 2.75 7.90 8.31 24.59 13.74
Merck & Co. Inc. (NYSE:MRK) 55.37 0.450 3.25 51.3% 47.1% -2.50 -0.12 -0.85 2.14 2.27 2.33
Novo Nordisk A/S (NYSE:NVO) 55.73 0.190 1.36 37.6% 33.2% 31.69 32.59 3.59 42.69 -8.43 16.49
Novartis AG (NYSE:NVS) 98.35 0.704 2.86 54.7% 51.8% 6.14 7.66 -12.27 12.52 3.56 4.64
Pfizer Inc. (NYSE:PFE) 32.66 0.280 3.43 54.4% 47.7% 4.85 6.65 -7.21 13.70 7.69 8.37
Perrigo Company PLC (NYSE:PRGO) 185.42 0.125 0.27 6.5% 5.6% 10.92 11.07 5.30 16.73 19.05 16.07
Roche Holding AG (OTCQX:RHHBY) 34.16 0.271 3.17 59.2% 54.5% -9.44 -6.56 -14.49 -3.98 -1.28 5.37
Sanofi (NASDAQ:SNY) 49.28 0.402 3.26 50.7% 49.3% 8.05 11.57 -1.86 1.59 -15.81 -2.40
St. Jude Medical Inc. (NYSE:STJ) 72.62 0.290 1.60 29.1% 26.8% 11.67 13.01 -5.24 13.60 7.41 8.03
Stryker Corporation (NYSE:SYK) 99.69 0.345 1.38 27.0% 24.6% 5.68 6.78 -1.73 16.00 13.11 17.54
Teva Pharmaceutical Industries (NYSE:TEVA) 65.03 0.340 2.09 25.3% 25.6% 13.08 14.26 5.08 24.53 -3.68 11.75
Thermo Fisher Scientific, Inc (NYSE:TMO) 125.52 0.150 0.48 8.1% 7.3% 0.18 0.54 -4.40 9.28 0.00 5.13
Zimmer Biomet Holdings, Inc. (NYSE:ZBH) 104.37 0.220 0.84 13.1% 11.3% -7.98 -7.40 5.16 2.53 0.00 7.04
Zoetis Inc. (NYSE:ZTS) 45.78 0.083 0.72 19.9% 17.3% 6.39 6.97 -1.78 10.25 13.79 na

Average       2.11 39.1% 39.1% 3.34 4.76 -0.32 12.16 6.48 11.21

With the 10 Treasury at 2.18% and the sector average yield [on Q3 Divs] at 2.11% - the spread is -7 basis points.
The cap weighted ETF XLV is up 5.00% year to date - with dividends included, its total return is 5.31%.
The yield on the XLV is 1.29% using the sum of LTM dividends - while LTM dividend growth is 8.19%.

Differences between my coverage universe and the XLV My coverage includes BAYRY, GSK, NVO, NVS, RHHBY and SNY - and those non-US companies are not in the XLV. The XLV includes significant weightings in non-dividend paying CELG and BIIB. It has minor weightings in REGN, VRTX, MYL, BSX, ISRG, EW, MNK, LH and WAT. Stats for these are provided below. For this grouping a dividend CAGR is meaningless. I show the last two end of quarter Yahoo projections of five year EPS growth in the two columns on the right.


    12-31-14 8-28 YTD Change   Earnings Per Share P/E Ratios Yahoo CAGR
Company and ticker Price Price Price EPS Target   2013 2014 2015 2016 2014 2015 2016 Q4-14 Q1-15 Q2-15

Biogen Idec Inc. (NASDAQ:BIIB) 342.40 303.69 -11.31 -2.27 2.80   896 1383 1592 1778 21.96 19.08 17.08 21.20 17.64 16.84
Boston Scientific Corporation (NYSE:BSX) 13.17 17.07 29.61 2.25 3.43   46 84 91 106 20.32 18.76 16.10 10.53 9.87 11.09
Celgene Corporation (NASDAQ:CELG) 113.35 124.04 9.43 -1.65 28.11   298 371 478 595 33.43 25.95 20.85 25.76 25.46 25.09
Edwards Lifesciences (NYSE:EW) 129.90 144.70 11.39 8.44 23.03   313 350 437 479 41.34 33.11 30.21 14.87 14.06 13.94
Gilead Sciences Inc.   93.79 107.78 14.92 18.32 3.26   204 809 1169 1164 13.32 9.22 9.26 23.96 13.22 20.60
Intuitive Surgical, Inc. (NASDAQ:ISRG) 531.24 514.24 -3.20 -4.14 9.38   1673 1610 1735 1982 31.94 29.64 25.95 3.50 3.58 12.70
Laboratory Corp. of America (NYSE:LH) 108.25 119.61 10.49 7.79 27.57   695 680 789 879 17.59 15.16 13.61 8.75 9.90 11.08
Mallinckrodt PLC (NYSE:MNK) 97.91 89.93 -8.15 10.98 24.54   317 494 738 820 18.20 12.19 10.97 24.09 28.79 28.79
Mylan, Inc. (NASDAQ:MYL) 57.60 50.37 -12.55 1.44 12.13   289 356 422 473 14.15 11.94 10.65 14.26 13.14 24.21
Regeneron Pharmaceuticals (NASDAQ:REGN) 413.48 536.70 29.80 3.75 51.47   381 1000 1218 1472 53.67 44.06 36.46 20.21 18.86 20.00
Vertex Pharmaceuticals (NASDAQ:VRTX) 118.41 134.05 13.21 234.21 12.28   -198 -314 -127 411 na na 32.62 19.00 29.90 29.90
Waters Corporation (NYSE:WAT) 114.35 124.81 9.15 -1.35 18.80   504 548 585 642 22.78 21.34 19.44 9.42 9.08 9.17

Average       7.73 23.15 18.07           26.25 21.86 22.11   16.13 18.62

The Predictive Power of the Dividend/EPS Ratio on Valuations: Dividend to EPS ratios range from as low as the single digits to the 80s - and may look all too random. But this ratio - during most time periods - helps explain the variety of yields and P/E ratios. There is some correlation to YTD price changes as well.

The stocks that did not pay dividends had a YTD mean price gain = 7.73%. They had an average price/earnings ratio = 21.86. They had an average Yahoo CAGR projection of 18.62.

In this sector, there are growth companies that have not been dividend growth companies. Having dividend/EPS ratios under 25% is a key indicator of irregular dividend growth. The following stocks had Q2-15 Dividend/EPS ratios of less than 25%: A, ABC, BCR, GILD, MCK, PRGO, TMO, ZBH and ZTS. Their YTD mean price gain = 4.46% and 5 of the 9 beat the sector mean yearly price gain [3.34%]. Their mean yield = 0.80% and they had an average price/earnings ratio = 19.17. Their mean LTM dividend growth = 9.77% and they had an average CAGR projection of 9.39.

The following had Q2-15 Dividend/EPS ratios of more than 25% - but less than 40%: AMGN, BAYRY, BDX, CAH, DGX, MDT, NVO, STJ, SYK and TEVA. Their YTD mean price gain = 6.13% and 4 of the 10 beat the sector mean yearly price gain. Their mean yield = 1.81% - and they sold at an average price/earnings ratio = 17.88. Their mean LTM dividend growth = 8.90% and they had an average CAGR projection of 7.71.

The following had Q2-15 Dividend/EPS ratios of more than 40% - but less than 50%: ABBV, ABT and JNJ. Their YTD mean price gain = -3.00% and 0 of the 3 beat the sector mean yearly price gain. Their mean yield = 2.81% - and they sold at an average price/earnings ratio = 17.22. Their mean LTM dividend growth = 12.55% and they had an average CAGR projection of 7.40.

The following companies had Q2-15 Dividend/EPS ratios of more than 50%: AZN, BAX, BMY, GSK, LLY, MRK, NVS, PFE, RHHBY and SNY. Their YTD mean price gain = 1.42% and 4 of the 10 beat the sector mean yearly price gain. Their mean yield = 3.39% - and they sold at an average price/earnings ratio of 20.56. Their mean LTM dividend growth = -0.74% and they had an average CAGR projection of 4.72.

The Predictive Power of subsector on Valuations: There is a huge difference in the type of products or services that this universe produces. Could that difference account for differences in performance and valuation?

The following stocks were in the Distribution sub-sector: ABC, CAH and MCK. Their YTD mean price gain = 3.97% and 1 of the 3 beat the sector mean yearly price gain [3.34%]. Their mean yield = 1.19% and they had an average price/earnings ratio = 17.58. Their mean LTM dividend growth = 17.63% and they had an average CAGR projection of 11.00.

The following stocks were in the Medical devices sub-sector: BAX, BCR, BDX, MDT, STJ, SYK and ZBH. Their YTD mean price gain = 4.15% and 3 of the 7 beat the sector mean yearly price gain [3.34%]. Their mean yield = 1.57% and they had an average price/earnings ratio = 20.18. Their mean LTM dividend growth = 9.18% and they had an average CAGR projection of 7.11.

The following stocks were in the Pharmaceutical sub-sector: ABBV, AMGN, AZN, BAYRY, BMY, GSK, JNJ, LLY, MRK, NVO, NVS, PFE, RHHBY, SNY, TEVA and ZTS. Their YTD mean price gain = 2.89% and 7 of the 16 beat the sector mean yearly price gain [3.34%]. Their mean yield = 2.84% and they had an average price/earnings ratio = 19.20. Their mean LTM dividend growth = 2.55% and they had an average CAGR projection of 5.90.

The following stocks were in the Diagnostic sub-sector: A, DGX and TMO. Their YTD mean price gain = -2.64% and 0 of the 3 beat the sector mean yearly price gain [3.34%]. Their mean yield = 1.26% and they had an average price/earnings ratio = 17.65. Their mean LTM dividend growth = 7.03% and they had an average CAGR projection of 7.33.

Earnings Growth & P/E Ratios 8-28

Fiscal and calendar years are not in sync. ABC, BDX, CAH, MCK, MDT and PRGO began fiscal 2015 at least one quarter earlier than calendar 2015. Several stocks sell at valuations based on their drug pipelines - and short-term growth in EPS fails to capture a growth picture which is expected to come in 2016 and beyond. BMY is a good example. 2017 EPS projection along with the 2016 projections for GSK and NVO are from NASDAQ. The rest of the projections are from Yahoo Finance.


  Earnings / Share Earn. Growth P/E Ratios 15 EPS Range
Co. 2011 2012 2013 2014 2015 2016 2017 13-14 14-15 15-16 2014 2015 2016 High Low Range

A 295 312 288 304 170 197 220 5.56% -44.08% 15.88% 12.01 21.48 18.53 171 167 2.35%
ABBV 0 0 314 332 426 503 578 5.73% 28.31% 18.08% 19.27 15.02 12.72 433 414 4.46%
ABC 251 276 314 397 497 559 636 26.43% 25.19% 12.47% 25.41 20.30 18.04 505 485 4.02%
ABT 0 174 201 228 217 242 288 13.43% -4.82% 11.52% 20.18 21.21 19.02 220 213 3.23%
AMGN 533 651 760 870 975 1072 1214 14.47% 12.07% 9.95% 17.92 15.99 14.54 990 923 6.87%
AZN 733 641 506 428 426 406 389 -15.42% -0.47% -4.69% 14.80 14.87 15.60 427 415 2.82%
BAX 234 246 254 266 132 142 169 4.72% -50.38% 7.58% 14.57 29.36 27.29 162 109 40.15%
BAYRY 0 688 745 799 786 871 na 7.25% -1.63% 10.81% 17.02 17.31 15.62 806 802 0.51%
BCR 640 657 578 840 908 1004 1101 45.33% 8.10% 10.57% 23.51 21.75 19.67 911 897 1.54%
BDX 533 537 581 625 711 843 950 7.57% 13.76% 18.57% 22.85 20.09 16.94 712 702 1.41%
BMY 228 199 182 185 184 224 304 1.65% -0.54% 21.74% 32.76 32.94 27.06 186 166 10.87%
CAH 267 321 373 384 500 576 576 2.95% 30.21% 15.20% 21.72 16.68 14.48 453 435 3.60%
DGX 285 392 400 410 476 511 535 2.50% 16.10% 7.35% 16.80 14.47 13.48 488 430 12.18%
GILD 181 171 201 809 1169 1164 na 302.49% 44.50% -0.43% 13.32 9.22 9.26 1262 1006 21.90%
GSK 325 353 373 296 228 276 307 -20.64% -22.97% 21.05% 13.94 18.09 14.95 238 237 0.44%
JNJ 500 510 552 597 617 640 679 8.15% 3.35% 3.73% 15.94 15.42 14.87 624 607 2.76%

  Earnings / Share Earn. Growth P/E Ratios 15 EPS Range
Co. 2011 2012 2013 2014 2015 2016 2017 13-14 14-15 15-16 2014 2015 2016 High Low Range

LLY 441 339 415 278 328 358 394 -33.01% 17.99% 9.15% 29.92 25.36 23.24 325 311 4.27%
MCK 486 638 633 835 1274 1455 1669 31.91% 52.57% 14.21% 24.05 15.76 13.80 1275 1240 2.75%
MDT 337 346 375 382 437 484 490 1.87% 14.40% 10.76% 19.26 16.83 15.20 448 435 2.97%
MRK 377 382 349 349 351 382 396 0.00% 0.57% 8.83% 15.87 15.77 14.49 347 330 4.84%
NVO 102 142 167 162 202 229 262 -2.99% 24.69% 13.37% 34.40 27.59 24.34 197 177 9.90%
NVS 378 389 501 523 515 544 617 4.39% -1.53% 5.63% 18.80 19.10 18.08 520 515 0.97%
PFE 231 219 222 226 206 235 252 1.80% -8.85% 14.08% 14.45 15.85 13.90 210 200 4.85%
PRGO 401 499 561 639 775 889 986 13.90% 21.28% 14.71% 29.02 23.93 20.86 780 728 6.71%
RHHBY 140 162 156 156 183 199 na 0.00% 17.31% 8.74% 21.90 18.67 17.17 194 186 4.37%
SNY 348 319 340 345 317 326 352 1.47% -8.12% 2.84% 14.28 15.55 15.12 318 313 1.58%
STJ 328 239 376 398 398 433 471 5.85% 0.00% 8.79% 18.25 18.25 16.77 398 391 1.76%
SYK 372 407 423 473 511 561 597 11.82% 8.03% 9.78% 21.08 19.51 17.77 515 497 3.52%
TEVA 497 535 501 507 538 531 526 1.20% 6.11% -1.30% 12.83 12.09 12.25 540 504 6.69%
TMO 416 494 542 696 738 823 891 28.41% 6.03% 11.52% 18.03 17.01 15.25 752 730 2.98%
ZBH 480 530 575 606 673 779 698 5.39% 11.06% 15.75% 17.22 15.51 13.40 682 630 7.73%
ZTS 0 108 142 153 166 191 232 7.75% 8.50% 15.06% 29.92 27.58 23.97 168 161 4.22%

Sector Average           15.37% 7.09% 10.67% 20.04 19.02 17.11     9.28

Disclosure: I am/we are long ABC, ABT, AMGN, GILD, NVO, STJ, SYK.