There’s no denying that the biotechnology sector has prospered amid the coronavirus pandemic. In fact, a basket of stocks that tracks the biotech, the iShares Nasdaq Biotechnology ETF (IBB), surged 9.3% this year and has more than tripled the performance of the S&P 500’s 2.2% over the same time period. Just take a look at the chart below.
Many biotech and healthcare stocks are releasing their earnings reports this week, which includes more well-known pharmaceutical stocks like Pfizer (PFE), Gilead Sciences (GILD) and Moderna (MRNA). So, let’s take a quick look at their earnings results.
Pfizer is one of the world’s largest pharmaceutical companies and develops a variety of medicines and vaccines, including one for COVID-19. For its third quarter, PFE reported slightly better-than-expected adjusted earnings of $0.72 per share, which topped analysts’ expectations for adjusted earnings of $0.70 by 2.9%. This was still down 4% year-over-year from the $0.75 earned in the third quarter of 2019. Third-quarter revenue of $12.13 billion missed estimates calling for $12.3 billion.
Folks might associate Gilead Sciences with its remdesivir drug, as it is an approved treatment for COVID-19 by the FDA. However, it also creates treatments for HIV and hepatitis, as well as moderate to severe rheumatoid arthritis (RA) and lymphoma, just to name a few.
Moderna is also producing its own COVID-19 vaccine and is now very close to approval for widespread use. For the third quarter, MRNA reported a per share loss of $0.59, a wider-than-expected loss of $0.38. The company beat the expected revenue of $80.6 million, nearly doubling to $157.9 million. The company’s increase in revenue but steeply declining earnings per share is due to of the rise of research and development costs for the COVID-19 vaccine.
Now, let’s see how they stack up in my Portfolio Grader:
All three companies receive low marks for their Fundamental Grade, which isn’t surprising given the mixed third-quarter earnings reports.
So, if you’re interested in high-growth biotech companies with superior fundamentals, you’ll want to consider looking elsewhere.
My Growth Investor biotech stocks –DexCom, Inc. (DXCM), IDEXX Laboratories, Inc. (IDXX) and Quidel Corporation (QDEL) are a great place to start. They also reported their earnings results this week, and I’m pleased to say that they all knocked it out of the park.
Let’s take a look…
DexCom, Inc. (DXCM)
DexCom, Inc. has been innovating the continuous glucose monitoring (CGM) industry since 1999. With DXCM’s technology, a diabetic does not need to prick their finger to test their blood glucose levels. Instead, they insert a small sensor under the skin. They will then be notified via a display device when their glucose levels are either too low or high. It is simple, user-friendly and pain-free. The CGM market is expanding rapidly and DXCM is seeing a strong demand for its products and services right now.
This was evident in the company’s third quarter report. DXCM crushed analysts’ earnings and revenue estimates for the third quarter and, in turn, increased its full-year outlook.
During the third quarter, revenue increased 26% year-over-year to $500.9 million, compared to $396.3 million in the same quarter a year ago. Third-quarter earnings soared 55% year-over-year to $93.6 million, or $0.94 per share, up from $60.4 million, or $0.65 per share, in the third quarter of 2019. The consensus estimate called for earnings of $0.64 per share on $476.75 million, so DexCom posted a 46.9% earnings surprise and a 5.1% revenue surprise.
Looking ahead to full-year 2020, DexCom now expects revenue to grow 29% year-over-year to $1.9 billion. That’s up from previous forecasts for revenue of $1.85 billion.
The stock fell over 20% this week on some profit-taking, which is perfectly normally following its strong run over the past year, so I’m not concerned.
IDEXX Laboratories, Inc. (IDXX)
IDXX is a leading provider of veterinary products and services. IDEXX Labs also offers equine health products, livestock and poultry diagnostics, dairy testing and water testing solutions. In fact, the company’s products offer reliable diagnosis and treatments for more than 50 diseases that are prevalent in cows, pigs, chickens and horses. And its diagnostic tests evaluate the quality and safety of water and milk. It also developed a COVID-19 diagnostic test for animals.
Shares of IDEXX Laboratories, Inc. surged on Thursday to a new 52-week high of $453.20 after the company posted double-digit earnings and revenue growth for its third quarter. IDXX noted that strong recurring revenue from its Companion Animal Group Diagnostics business (23%) helped drive the company’s overall results during the quarter.
Third-quarter revenue rose 19% year-over-year to $722 million, while earnings per share jumped 36% year-over-year to $1.69. The analyst community was expecting earnings of $1.43 per share on $672.53 million, so IDXX topped earnings estimates by 18.2% and revenue forecasts by 7.4%.
Quidel Corporation (QDEL)
Quidel Corporation develops diagnostic testing solutions that provide quick test results and, in turn, reduce healthcare costs and improve patient outcomes. So, it’s not too surprising that Quidel has developed a diagnostic test for COVID-19. With coronavirus cases on the rise, Quidel announced that will increase the production of its rapid antigen test. In fact, the company recently doubled its production of the Sofia rapid antigen test to about two million tests per week.
The company unveiled blowout third-quarter earnings and revenue results on Thursday afternoon. Company management stated, “Our strong third-quarter results serve as a preamble for what will be a truly remarkable finish to 2020.”
For the third quarter, Quidel achieved total revenue of $476.1 million, up 276% from the $126.5 million in the same quarter a year ago. Third-quarter earnings surged 725.7% year-over-year to $5.78 per share, compared to $0.70 per share in the third quarter of 2019. The analyst community was expecting earnings of $4.75 per share on revenue of $450.39 million, so Quidel beat earnings estimates by 21.7% and revenue forecasts by 5.7%.
Now let’s see how my Growth Investor stocks stack up in Portfolio Grader:
Not only do these Growth Investor biotech stocks rank better than PFE, GILD and MRNA overall, they have outperformed them, year-to-date, too.
Moderna is neck-and-neck with Quidel Corporation, but as you can see in the chart above, DXCM, QDEL and IDXX all trounced PFE and GILD.
This is what happens when you invest in the fundamentally superior stocks.
And this is just biotechnology. My Growth Investor Buy Lists are chock full of stocks from other sectors with similar potential. I have 43 stocks on my Growth Investor High Growth Buy List that range from technology to insurance to retailers and much, much more. I just added three new stocks to my Growth Investor Buy Lists in yesterday’s Growth Investor November Monthly Issue – including another biotech company – so there are plenty of stocks to choose from!
I also released my latest Top 5 Stocks list, reviewed some of my companies’ latest earnings results (there were a lot of them!) and previewed next week’s earnings reports. There was a lot to talk about, and you can catch up here.
Note: I believe stocks are poised to go much higher over the longer term. In fact, I’m predicting the Dow will hit 200,000 in the coming years.
I know that sounds crazy, but history proves otherwise.
Note: The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Dexcom, Inc. (DXCM), IDEXX Laboratories, Inc. (IDXX), Quidel Corporation (QDEL), Pfizer Inc (PFE)