Gilead Sciences
Gilead Sciences, Inc. (GILD ) is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines. The company’s primary areas of focus are immunodeficiency virus (HIV), liver diseases, such as chronic hepatitis C virus (HCV) and chronic hepatitis B virus (HBV), oncology and inflammation, and serious cardiovascular and respiratory conditions. The company has two high-profile treatments: Harvoni and Sovaldi. These two drugs accounted for nearly 60% of the company’s revenue in both quarters of 2015.
Additionally, Gilead Sciences created and sells the world’s top-selling HIV medications, Truvada and Atripla, and commands approximately 75% of the U.S. treatment market and more than 50% worldwide.
Gilead Sciences recently started paying a quarterly dividend of $0.43 per share. Its first payout was on 6/29/2015. It’s going Ex-Dividend again on 9/14/2015. Its annual payout comes to $1.72, yielding 1.50% on its current price of $114.
| Earnings Estimate | Current Quarter Sep. 2015 | Next Quarter Dec. 2015 | Current Year Dec. 2015 | Next Year Dec. 2016 |
|---|---|---|---|---|
| Average Estimate | 2.81 | 2.78 | 11.68 | 11.67 |
| Number of Analysts | 17 | 17 | 19 | 19 |
| Low Estimate | 2.6 | 2.41 | 11.06 | 9.73 |
| High Estimate | 3.08 | 3.45 | 12.4 | 14.45 |
| Year Ago EPS | 1.84 | 2.43 | 8.09 | 11.68 |
Earnings are expected to remain stable next year.
Financial Check
| Company | Market Cap | EPS | P/E | P/B | P/S | Div | Yield % | Current Ratio | ROE | Beta | NPM% | GPM% | Revenue | Net Income |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gilead Sciences | $173.56B | 9.53 | 12.1 | 11.24 | 7.01 | 0.43 | 1.49 | 3.08 | 89.01 | 0.75 | 48.45 | 84.78 | 24,890 | 12,059 |
| GlaxoSmith Kline | $106.87B | 6.26 | 7.17 | 16.5 | 2.99 | 2.5 | 5.63 | 1.1 | 48.95 | 0.75 | 12.31 | 69.41 | 35,889.12 | 4416.33 |
| Johnson & Johnson | $276.87B | 5.68 | 17.45 | 4.01 | 3.74 | 2.76 | 2.98 | 2.36 | 22.7 | 0.62 | 21.96 | 70.41 | 74,331 | 16,323 |
| Merck & Co. | $165.95B | 3.42 | 17.1 | 3.45 | 3.95 | 1.76 | 3.05 | 1.77 | 24.22 | 0.47 | 28.25 | 61.44 | 42,237 | 11,934 |
| Pfizer | $219.94B | 1.41 | 24.95 | 3.16 | 4.45 | 1.04 | 3.13 | 2.67 | 12.32 | 0.83 | 18.39 | 80.8 | 49,605 | 9120 |
| Roche Holding Ltd. | $245.57B | 1.38 | 25.78 | 12.19 | 5.1 | 0.14 | 2.8 | 1.35 | 48 | 20.09 | 20.09 | 72.79 | 48,499.90 | 9743.51 |
Major Competitor
Gilead Science’s major competitors, as noted above, are Merck (MRK ), GlaxoSmithKlein (GSK ), J&J (JNJ ), Pfizer (PFE ), and Roche (RO).
EPS Analysis
Gilead has the highest EPS in the entire biotech space at 9.53 on a trailing 12-month basis, which is expected to grow to 11.67 next year by December 2016.
Relative Valuation
At a P/E of 12.1 it is lower than all its competitors except Glaxo. P/S is the highest among all its competitors, which is a drawback, however, their sales are very high margin sales accounting for the premium valuation.
Cash Rich
GILD is cash rich. Its current ratio of 3.08 is considerably higher than its competitors.
ROE
GILD has the highest ROE among all its competitors.
Beta
A lower beta means lower volatility. 0.75 is in-line with GILD’s competitors.
Margins
Gilead has the highest margins among all its competitors.
Top line and Bottom line
Gilead Sciences generates more profit than Merck, with half of Merck’s sales.
Dividend Angle
Gilead Sciences is more of a growth stock and less of a dividend-paying stock. This would provide a capital growth angle to one’s portfolio.
Recommendation: Fundamental
Gilead Sciences is not a typical Dividend.com pick. It’s a new dividend payer and does not yet have one of the highest yields. Biotech stocks are usually considered “risky”, however, GILD has solid earnings and enough cash to not only sustain a dividend but also to possibly increase it in the future. Further, there is an increasing demand for health care; for example, an estimated 3.2 million Americans are living with chronic hepatitis C, with approximately 17,000 new hepatitis C cases each year in the U.S.
Recommendation: Technical
The stock has very strong support at $100, in which range it stayed from August 15, 2014 to May 8, 2015. Beyond $120, on strong volume we see an upside.
Conoco Phillips (COP)
We recommended COP on 5/10/2012 at a price of $53.47. COP is back to the price at which we recommended it. With no capital loss on the buying price and a gain of dividends, we recommend investors realign their portfolios with less energy and more biotech. With oil prices recently hitting a six-month low, COP is expected to give a poor EPS in 2016.
Dividend.com also wants to admit that we were a bit late in removing the energy names from the BDS list. We did not forecast the sharp and rapid decline in oil, however, it’s better late than never.
Typically we do not make reactionary decisions – such as a volatile movement in oil – but we do believe that the lower oil prices will persist for some time and that it will take firms like COP a relatively long time to recover – if they can.
Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.
