Which of These 5 Healthcare Stocks Has the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here’s your Cheat Sheet to how these top 5 healthcare stocks rank via earnings trends:

Johnson & Johnson (NYSE:JNJ): Current Price $73.99

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 63,750 61,900 61,590 65,030 67,220
Diluted EPS ($) 4.57 4.40 4.78 3.49 3.86

Johnson & Johnson reported an improvement in revenues in 2011 and 2012. EPS declined sharply in 2011, but improved somewhat in 2012.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 16,260 16,140 16,480 17,050 17,560
Diluted EPS ($) 0.09 1.41 0.50 1.05 0.91

Revenue has grown nicely over the last three quarters of the review, though EPS has been somewhat erratic, and fell off in the latest quarter. We need to look for better stocks in the sector…

Bristol-Myers Squibb (NYSE:BMY): Current Price $36.48

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 17,720 18,810 19,480 21,240 17,620
Diluted EPS ($) 2.62 5.34 1.79 2.16 1.16

Things were humming along nicely on the revenue front until 2011, but Bristol-Myers turned the clock back in 2012. EPS has also been rather jumpy across the period under review.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 5,454 5,251 4,443 3,736 4,191
Diluted EPS ($) 0.51 0.64 0.38 -0.43 0.56

Bristol-Myers hit a rough patch in September 2012 and reported a negative EPS. However, they rectified this the very next quarter, improving revenue by over 12%, and reporting a sharply higher EPS. Let’s not settle here just yet, though…

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Abbott Laboratories (NYSE:ABT): Current Price $33.47

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 29,530 30,760 35,170 38,850 39,870
Diluted EPS ($) 3.12 3.69 2.96 3.01 3.72

Revenue has grown impressively over the last five years at Abbott. EPS has been somewhat inconsistent, but reported substantial jumps in 2011 and 2012.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 10,380 9,457 9,807 9,773 10,840
Diluted EPS ($) 1.04 0.78 1.08 1.21 0.66

Unfortunately, we’re not impressed with Abbott’s quarterly performance. Sales have remained essentially flat over the five quarters examined, though December 2012 was a welcome improvement. However, this came at a cost to earnings because EPS almost halved in that quarter. Not the best healthcare stock here…

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Amgen Inc. (NASDAQ:AMGN): Current Price $85.65

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 15,000 14,640 15,050 15,580 17,260
Diluted EPS ($) 3.77 4.51 4.79 4.04 5.52

Amgen’s revenue has grown nicely between 2010 and 2012. Except for a blip in 2011, EPS has also shown impressive movement over the past five years. 2012 was certainly a stellar performance on every count.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 3,973 4,048 4,477 4,319 4,421
Diluted EPS ($) 1.09 1.48 1.61 1.41 1.01

Unfortunately, in recent quarters Amgen seems to have lost momentum. Sales have hit a plateau and EPS has declined sharply in the two latest quarters. Surely, there could be better candidates out there…

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Pfizer Inc. (NYSE:PFE): Current Price $27.51

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 48,300 49,270 67,060 67,420 58,990
Diluted EPS ($) 1.20 1.23 1.02 1.27 1.94

Revenue at Pfizer reached new highs in 2010 and 2011. Unfortunately, 2012 has not kept pace.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 17,830 15,400 15,060 13,980 15,070
Diluted EPS ($) 0.18 0.24 0.43 0.43 0.85

Pfizer has struggled with some key drugs coming off patent. However, earnings and revenues both increased quarter-over-quarter, so we’ll add this one to our watch list.

Conclusion

Bristol-Myers and Pfizer passed our “E-Squared” investment analysis, however Pfizer looks a bit stronger with revenues at this point.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!