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Is It Time to Buy These 3 Dow Jones Stocks? Analysts Weigh In

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·5 min read
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Voting in the U.S. presidential election is over and the world eagerly waits to see whether incumbent president Donald Trump will win four more years in the White House, or whether Joe Biden will put an end to one of the most controversial presidencies in the United States’ history.

Although certain sectors would benefit from a President Donald Trump win, while other sectors would advance if Joe Biden wins, the pharmaceutical sector will be less affected either way. This is because everyone needs healthcare, especially these days with the COVID-19 pandemic still very much of a world-wide concern.

With this in mind, we used TipRanks’ database to identify three large pharmaceutical stocks from the Dow Jones industrial average that have considerable upside potential and that have been endorsed by the analyst community. Let’s take a closer look. 

Amgen (AMGN)

First up we have Amgen, a leading biotechnology company with a focus on six therapeutic areas: cardiovascular disease, oncology, bone health, neuroscience, nephrology and inflammation.

Amgen reported impressive third quarter results on October 28 which beat consensus estimates on both sales and earnings. Revenue rose 12% to $6.4 billion, while adjusted earnings jumped 19% to $4.37 per share. The gains were driven by higher volumes, which offset lower prices on several drugs.

Cowen analyst Yaron Werber is bullish on the company’s prospects going forward, noting, “We like Amgen's fundamentals due to the diversified product mix, the biological franchise with durable protection, productive and innovative pipeline, tight controls over operating expenses and aggressive cash return to shareholders."

Although generic drug manufacturers are posing a threat to Amgen’s Enbrel and Sensipar drugs, the 5-star analyst believes these risks are mitigated. “…new product launches including Aimovig and biosimilars are providing new growth prospects while legacy franchises decline. In our opinion, Amgen should continue to provide sustainable growth while navigating through turbulent waters as legacy franchises erode," Werber explained.

Accordingly, Werber rates Amgen an Outperform (i.e. Buy) and has a $294 price target on the stock. The figure implies healthy upside potential of 27% ahead. (To watch Werber’s track record, click here)

As for the rest of the Street, the results are mixed. Amgen has been assigned 11 Buys, 10 Holds and no Sells. This translates to a Moderate Buy consensus rating. The average price target is $258.18 and represents a potential gain of 12%. (See Amgen stock analysis on TipRanks)

Johnson & Johnson (JNJ)

Next up is healthcare heavyweight Johnson & Johnson. The company operates three segments: Consumer, Pharmaceutical, and Medical Devices.

JNJ reported third-quarter results that demonstrated a recovery from the impact of the COVID-19 pandemic. Sales rose 1.7% to $21.1 billion and adjusted EPS increased 3.8% to $2.20. Given the improvement in operating performance, management raised its sales and earnings guidance for the year.

Analyst Louise Chen, of Cantor Fitzgerald, weighed in on the earnings, commenting, “Johnson & Johnson's third quarter results reflect solid performance and positive trends across its business as well as better-than-expected procedure recovery in Medical Devices, growth in Consumer Health, and above market sales growth in Pharmaceuticals.”

Chen is encouraged by the strong showing amid COVID-19 pandemic, noting: “The results this quarter underscore the importance of Johnson & Johnson's diversified business model, which allowed the company to beat expectations despite headwinds from the pandemic.”

Based on the above, Chen rates the company an Overweight (i.e. Buy) along with a $180 price target. The target represents potential upside of 26.67% from current levels (To watch Chen’s track record, click here)

Turning to the rest of the Street, other analysts are on the same page as Chen. 4 Buys and no Holds or Sells assigned in the last three months add up to a Strong Buy consensus rating. The average price target is $169, which implies a potential increase of 20% (See JNJ stock analysis on TipRanks)

Merck & Company (MRK)

Last but not least is Merck, a giant biopharmaceutical company that treats diseases such as cancer, infectious diseases and emerging animal diseases.

Merck announced positive third quarter results with revenues of $12.6 billion, which exceeded the consensus estimate of $12.2 billion and adjusted EPS of $1.74, which surpassed the consensus estimate of $1.44. Adding to the good news, Merck also raised its full year guidance to 47.6 billion to $48.6 billion, from the previous expectations of $47.2 billion to $48.7 billion.

Leerink Daina Graybosch commented on the announcement: “Full year sales guidance was taken up, and has now almost reverted back to pre-COVID guidance for 2020 provided at start of the year; the steady increase in guidance over past two quarters reinforces the strength of MRK’s business lines and its ability to weather through external disruption.”

Turning to Merck’s oncology drug, Keytruda, which accounts for about 30% of the company’s sales. Merck has been extending its use since it was approved in 2014 by obtaining approval for the treatment of other cancers. Although there is concern that Keytruda has become too much of the company’s business creating an earnings concentration risk, Graybosch believes otherwise: “…we continue to be enthused about the life-cycle extension and immuno-oncology add-on opportunities available.”

To this end, Graybosch rates Merck shares an Outperform (i.e. Buy), with a $103 price target. This figure suggests a potential increase of 27%. (To watch Graybosch’s track record, click here)

Overall, the company gets a Moderate Buy consensus rating from the analyst community. This is based on 7 Buy and 3 Hold ratings. The average price target is $95.30 which indicates a 17% increase from current levels. (See Merck stock analysis on TipRanks)

To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.