On Jan 3, Zacks Investment Research upgraded Amgen Inc. (AMGN) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Amgen came out with strong third quarter results and an improved outlook for 2014 on Oct 27. The biotech company’s earnings track record is impressive with the company delivering positive earnings surprises in the last 4 quarters with an average beat of 10.97%. The long-term expected earnings growth rate for this stock is 8.9%.
Amgen’s third quarter 2014 results were impressive with earnings per share coming in at $2.30, well above the Zacks Consensus Estimate of $2.06 and the year-ago earnings of $1.93. Total revenues, which increased 6% to $5,031 million, also surpassed the Zacks Consensus Estimate of $4,918 million.
Amgen upped its 2014 guidance and now expects to earn $8.45–$8.55 per share on total revenues of $19.8 billion to $20 billion. Earlier in 2014, the company had guided towards earnings of $8.20–$8.40 per share on total revenues of $19.5 billion to $19.7 billion.
Amgen also provided an encouraging and better-than-expected preliminary outlook for 2015 in its business review meeting, which was held on Oct 28, 2014. The company is reducing positions as well as its facilities footprint and expects to generate annual cost savings of up to $1.5 billion by 2018. Amgen’s restructuring plan should make the company leaner and more cost-efficient. Most of the savings will be reinvested in the company’s efforts to launch new products.
In addition to this, Amgen plans to return more than 60% of adjusted net income to its stockholders through 2018. The company, which started paying dividends in 2011, announced a 30% increase in its dividend – 79 cents per share (had declared a dividend of 61 cents per share for the fourth quarter of 2014) – in the first quarter of 2015.
Amgen’s pipeline also looks promising. Leukemia drug, Blincyto, gained accelerated FDA approval last month. Meanwhile, Amgen has three candidates under regulatory review and important late-stage data readouts lined up for 2015 and 2016.
Other Stocks to Consider
Apart from Amgen, AMAG Pharmaceuticals, Inc. (AMAG), China Biologic Products, Inc. (CBPO) and Incyte Corporation (INCY) also carry a Zacks Rank #1 (Strong Buy).
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