AstraZeneca: Size, Safety and Consistency

Size, safety, and consistency are good attributes to have in this market, and AstraZeneca (AZN) possesses all three. The company is a pharmaceutical giant that makes such popular drugs as Crestor for cholesterol and Symbicort for asthma. AZN has a market cap of about $68 billion.

Just last week, the stock jumped 5% after it won an important patent fight in the U.S. over Seroquel, its anti-psychotic drug which is also its second-best seller. The U.S. court ruled that generic copies of Seroquel will not be launched anytime soon. Teva Pharmaceuticals was the other party involved. This is huge for AZN because generic competition is a huge problem for the whole industry as well as for AZN.

Although below its 52-week high, the stock has performed well year-to-date, gaining about 8% thus far. Investors are looking for places to hide in this bear market that has demolished many sectors. AZN’s consistent earnings growth and its 4% yield make it attractive to many different kinds of investors right now.

The analyst community has been increasingly bullish on AZN. Over the past three months, this year’s earnings estimates have increased 18 cents to $4.58 per share. Twenty percent of the covering analysts have lifted their estimates over the past month. The Correct Call believes the stock is undervalued at less than 10x next year’s estimated earnings. Its ROE of 38.7% is superb as is its operating margin of almost 30%. Additionally, the company generates tons of operating cash flow to the tune of $7.7 billion over the past year. This allows it to pay such a fat dividend. We see this stock at $53 over the next 6-12 months.

Suggested Stop: $42.31

Disclosure: none