GOAL IS SMOOTH
With the final quarter of 2019 beginning next Tuesday, many investors are taking a long hard look at their portfolios and trying to make some adjustments. While the end of the quarter window dressing and a non-top political and geopolitical narrative has weighed on stocks, the S&P 500 is poised to end the third quarter up almost 20% on the year.
Some analysts have noted that the rise of Elizabeth Warren in the polls has weighed on large-cap biotech and pharmaceuticals some. But that dampening of momentum is due to an outcome that is far from guaranteed and may be giving investors a very good entry point to stocks that are normally considered very conservative.
We screened our 24/7 Wall St. equity research universe looking for Buy-rated large-cap pharmaceuticals that look like solid ideas now, and we found four that look like very solid fourth-quarter ideas.
This top pharmaceutical and med-tech stock has very solid growth potential. Abbott Laboratories (NYSE: ABT) manufactures and sells health care products worldwide.
The company’s Established Pharmaceutical Products segment offers branded generic pharmaceuticals to treat pancreatic exocrine insufficiency; irritable bowel syndrome or biliary spasm; intrahepatic cholestasis or depressive symptoms; gynecological disorders; hormone replacement therapy; dyslipidemia; hypertension; hypothyroidism; Ménière’s disease and vestibular vertigo; pain, fever and inflammation; migraines; anti-infective clarithromycin; cardiovascular and metabolic products; and influenza vaccines, as well as to regulate physiological rhythm of the colon.
Its Diagnostic Products segment provides immunoassay and clinical chemistry systems; assays used to screen or diagnosis cancer, cardiac, drugs of abuse, fertility, infectious diseases, and therapeutic drug monitoring; hematology systems and reagents; diagnostic systems and cartridges; instruments to automate the extraction, purification and preparation of DNA and RNA from patient samples, and detects and measures infectious agents; genomic-based tests; informatics and automation solutions; and a suite of informatics tools and professional services.
Abbott investors receive a 1.55% dividend. Goldman Sachs has just an $81 price target on the shares, though the Wall Street consensus target is $94.32. The shares traded early Friday at $82.55.
This is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.
One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth.
AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.
Shareholders receive a 5.76% dividend. Citigroup just raised the stock to Buy with a huge $90 price target. The consensus price target is $86.55, and the stock was trading at $74.70.
This is another drugmaker with solid upside potential. 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.
Shareholders receive a 2.30% dividend. The whopping $144 Goldman Sach price objective compares with the $124.25 consensus target. The shares traded at $112.60 on Friday.
This remains a leading health care stock pick 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 offers shareholders a 2.72% dividend. The Merrill Lynch price target is $88. The consensus price target is $86.33, and shares were trading at $83.20.I'm interested in the Newsletter
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These four top large-cap pharmaceutical stocks for investors to consider all pay solid dividends. It may make sense to buy partial positions now and keep some dry powder as the third-quarter earnings will be coming out soon and could move the shares
After markets closed Wednesday, Tesla Inc. (NASDAQ: TSLA) reported that the company delivered approximately 97,000 vehicles in the third quarter, a record high. The company also said it produced 96,155 vehicles in the quarter, another record high.
Tesla’s performance did not live up to CEO Elon Musk’s “shot” at a target of 100,000 deliveries and the stock is being punished for missing a goal it never really set. Maybe one day Musk will catch on that words have meaning and will be a little more circumspect in what he says. Or maybe not.
The mix of deliveries and production tilted heavily toward the Model 3, Tesla’s least expensive model. The company built 79,837 of the vehicles in the quarter and delivered 79,600. Production of the Models S and X totaled 16,318 and deliveries totaled 17,400.
The company also reported that it received “record net orders in Q3 and [is] entering Q4 with an increase in [its] order backlog.” At the end of the second quarter, Tesla also increased its backlog but realized a decline in deposits paid as the company worked through its order backlog. That sequential decline in customer deposits diminished year-over-year cash flow by about $160 million.
Tesla has guided full-year deliveries of 360,000 to 400,000 vehicles. Including the third-quarter total, the company has delivered 255,370 vehicles, leaving a fourth-quarter target of 104,630 deliveries to meet the low-end of the company’s guidance. If Tesla can hit even 100,000 deliveries in the fourth quarter, the total would reflect a 45% year-over-year increase.
As Gene Munster and Will Thompson at Loup Ventures note, “[H]itting even the low end of 2019 guidance would be a big win for a company that struggles to properly set expectations.”
Tesla stock traded down about 5.7% early Thursday, at $229.21 in a 52-week range of $176.99 to $379.49. The consensus 12-month price target on the shares is $254.00.
OCTOBER NEWSLETTER 2
46,000 United Auto Workers (UAW) members who have been striking General Motors Co. (NYSE: GM) for the past 11 days will continue to receive health care coverage following the company’s announcement that it is reversing a previous decision to shove the costs of coverage to the union. A company spokesperson said the coverage never lapsed because shifting responsibility to the union was too complicated.
The union was not mollified. In a letter to GM’s top negotiator following the company’s reversal, Terry Dittes, the UAW’s vice-president for its General Motors department, wrote, “These irresponsible actions by General Motors are toying with the lives of hundreds of thousands of our UAW families.” Dittes also said that “public sentiment sees these actions of GM as a shameful act!”
The company and union representatives met late into the night Thursday and resumed negotiations again Friday morning, seeking to narrow if not close wide gaps between the union’s demands and GM’s offers.
The UAW is seeking higher wages, added health care benefits, profit sharing and added job security for new and temporary workers. GM wanted union members to pay a greater share of their health care costs (around 15% instead of the current 3%) and to increase productivity and flexibility in auto plants by hiring more temporary workers at a much lower hourly pay rate and with no benefits or paid vacation.
The strike is costing GM about $25 million a day, according to Michigan-based industry analysts at Anderson Economic Group. Lack of production could begin to impair the company’s ability to supply dealers with vehicles that are in high demand, causing the losses to pile up quickly.[Lay's Kettle Cooked]The union is also mulling an option that would keep workers off the job until a new contract is ratified by a member vote. Typically, workers return to their jobs when the company and union leadership announced an agreement. Delaying workers’ return to their jobs while conducting a vote could add weeks the time it takes to get production started again.
Given the turmoil around a federal corruption investigation into top union leaders, any agreement “will have to be good enough to sell itself,” Wayne State University director of labor Marick Masters told the Detroit Free Press. Masters added, “[Union members are] smart enough to separate the current leaders from the union and its role in helping them.”
When GM and other automakers report September sales next week, the headline numbers are expected to be significantly below August sales and September 2018 sales. The drop is largely due to a shift of the Labor Day holiday weekend into August this year. Still, it won’t look good to investors.GM stock traded down about 0.3% Friday morning, at $37.50 in a 52-week range of $30.56 to $41.90. The stock’s 12-month consensus price target is $48.17.
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