The elixir that the pharmaceutical companies have so far failed to come up with: One to cure ailing stock prices. Darlings of the 1980s and 1990s, these stocks have been sick puppies since the market's peak in early 2000.
Indianapolis-based Eli Lilly (LLY) certainly hasn't found the remedy. But it boasts more new and highly profitable medicines than its competitors, as well as one of the industry's most formidable drug pipelines, says Zacks Investment Research. "New products should drive above industry average growth over the next few years," Zacks analyst Jason Napodano says in a note to clients. "We think investors should establish positions in the shares before what we believe will be a very positive 2006."
The company has introduced several new drugs, all with big potential, in the past couple of years. They include Byetta for diabetes; Cialis, the long-lasting drug for erectile dysfunction; antidepressant Cymbalta; and Strattera for attention-deficit disorder.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The company's strategy is clear: It tries to attract the industry's best scientists, and it spends roughly 20% of sales annually on research and development. That's more than most competitors spend.
Napodano is particularly enthusiastic about Cymbalta, which shows promise against treatment-resistant depression and anxiety. He thinks the drug will be "a major driver of growth over the next several years." Another mental health medication, antipsychotic Zyprexa, which accounted for 30% of sales last year, has been experiencing increasing competition from newer drugs. Napodano expects sales to continue to decline, but at a much slower rate than last year.
As new Lilly drugs experience higher sales, Napodano estimates that earnings will increase more than 10% a year over the next four years. That's after years of mostly single-digit earnings growth. Analysts surveyed by Zacks expect the company to earn $3.15 per share this year and $3.41 next year. That gives the stock, recently $59, a price-earnings ratio of 19 on this year's earnings estimate. It yields an above-average 2.7%.
--Steven Goldberg
-
Don't Overpay the IRS: 6 Tax Mistakes That Could Be Raising Your BillTax Tips Is your income tax bill bigger than expected? Here's how you should prepare for next year.
-
Flashback Finance: The Cost of Retiring the Year You Were BornJust like groceries, gas and home prices, the cost of retiring is subject to inflation. Here is a look at what it cost to retire in the year you were born.
-
How One Hospital Visit Overseas Could Wreck Your FinancesProper planning can give you peace of mind and protection, regardless of what happens on your trips.
-
If You'd Put $1,000 Into UPS Stock 20 Years Ago, Here's What You'd Have TodayUnited Parcel Service stock has been a massive long-term laggard.
-
How the Stock Market Performed in the First Year of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
If You'd Put $1,000 Into Lowe's Stock 20 Years Ago, Here's What You'd Have TodayLowe's stock has delivered disappointing returns recently, but it's been a great holding for truly patient investors.
-
If You'd Put $1,000 Into 3M Stock 20 Years Ago, Here's What You'd Have TodayMMM stock has been a pit of despair for truly long-term shareholders.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have TodayHome Depot stock has been a buy-and-hold banger for truly long-term investors.
-
What the Rich Know About Investing That You Don'tPeople like Warren Buffett become people like Warren Buffett by following basic rules and being disciplined. Here's how to accumulate real wealth.
