August 27, 2023
Amgen, a leading biotech company with 24,000 employees worldwide, has demonstrated a positive trajectory of recovery and growth, showcasing improved fundamentals and a promising outlook. The company’s recent performance highlights its resilience and potential for long-term success.
Amgen’s notable products, including Neulasta and Enbrel, play significant roles in treating cancer, autoimmune diseases, and other conditions. The company’s strategic acquisitions further enhance its product pipeline and revenue streams, positioning it as a leader in the biopharmaceutical industry.
As of August 21, the U.S. Federal Trade Commission (FTC) has temporarily suspended (to September 18) its challenge of Amgen’s acquisition of Horizon Therapeutics, allowing room for consideration. Amgen’s pursuit of regulatory approvals for LUMAKRAS® underscores its commitment to advancing medical solutions for critical health challenges.
Market Performance and Recovery
- Stock Performance: Amgen’s shares rebounded by more than 15% from their 52-week low of $211.71 on June 1st. Notably, the stock has gained substantial momentum since its June quarter results were released on August 3rd. The stock gained +8.6% in the past month and +17.9% in the past quarter. But at $256.38, the stock is well under its all-time peak of $296.67 on November 8th.
Second-Quarter Financial Highlights
- Revenue: The second quarter produced a robust +6% yearly growth in total revenue, amounting to about $7 billion. This performance exceeded consensus estimates by $306 million, signaling strong demand for the company’s core medicines.
- Profit Margins: Amgen is a very profitable company with an Operating Margin of 62.5% and a Net Profit Margin of about 36%.
- Earnings: Q2 share earnings registered a +7.5% increase to reach $5.00, surpassing consensus by $0.51. Amgen’s ability to outperform earnings expectations reflects its positive operational execution.
Long-Term Growth Prospects and Catalysts
Several growth catalysts reinforce Amgen’s position for sustained growth:
- Research Funding: Amgen’s commitment to substantial research funding drives growth by expanding indications for existing core drugs, broadening the market potential, and extending patent life.
- Pipeline: The company’s portfolio includes innovative drugs engineered to address a range of illnesses and conditions, enhancing its growth opportunities.
- Strategic Acquisitions and Collaborations: Through acquisitions, licensing agreements, and collaborations, Amgen is diversifying its R&D capabilities, expanding its pipeline, and fostering growth.
Financial Metrics
- Cash Flow: The company’s cash flow per share of $34.30 reflects strong cash generation from operations.
- Dividends: Amgen offers an appealing 3.32% dividend yield, with $7.04 in dividends declared per share.
- Return on Equity: The company boasts a notable return on equity of 47%, demonstrating efficient utilization of shareholder equity.
Analyst Consensus and Price Targets
- Analyst Ratings: Based on 14 Wall Street analysts offering 12-month price targets in the last 3 months (7 Buy, 4 Hold, and 3 Sell), the stock is rated a Hold to Moderate Buy at best.
- Price Targets: The average price target is $247.67, with a high forecast of $310.00 and a low forecast of $185.00. The consensus average price target indicates a -3.4% change from the current stock price of $256.38.
Conclusion and Outlook
Building on a solid Q1, Amgen’s positive second-quarter performance contributed to a favorable full-year earnings outlook. The company’s continued impressive growth and robust demand for its products underpin this outlook. The company’s strategic focus on research funding, pipeline expansion, and growth initiatives positions it for sustained success. Investor sentiment, which is currently negative, mostly due to broad market weakness, fails to consider Amgen’s steady growth potential and attractive dividend yield. The 10-year Average Annual Total Return was a solid +12.3%, the same as Merck (MRK), so both would be suitable investment alternatives to the Maverick-10 portfolio.
10-year price chart
