92% of S&P 500 companies have now reported
Q1 earnings. According to Standard & Poors GAAP earnings for the
last 12 months are just $99.18.
That is down 6.4% from peak
earnings, which were posted after the third quarter of 2014. That is
also down 1% from the earnings number posted all the way back at the end
of 2013, which means that earnings have not grown since January of
2014.
Despite no earnings growth since January of 2014, the
S&P 500 is up 15% since then. It has moved from an already high
multiple of 18.5x to an even higher multiple of 21.5x.
A few notes:
–S&P’s
numbers are “per share” which means that they factor in the effect of
buybacks. So this divergence can’t be explained by corporate actions.
–It’s
true that earnings have been impacted by oil prices and exchange rates.
But if you own the S&P 500 you own oil fields and companies with
foreign operations, so the earnings power of your property has been
impaired by the environment.
–TTM earnings are expected to stay at
the $99 level through 3Q15 and then jump to end the year at $106.54.
Operating earnings are expected to stay at the $111 level and jump to
$116 at year end. This implies 31% and 18% earnings growth in Q4 for
GAAP and operating earnings respectively. When people talk about PE
multiples compared to forward earnings they are factoring in this
growth.
–That growth is expected to continue in 2016. EPS is
projected to be up 15-17% in 2016, reaching $133 per share. Take
analyst projections with a grain of salt though. At this point in 2014,
analysts expected 2015 earnings to be $137.
May 6 (Bloomberg) -- David Einhorn, president of Greenlight Capital
Inc., talks about technology stocks, investment strategy, and Federal
Reserve policy.
Speaking with Stephanie Ruhle and Erik Schatzker on Bloomberg
Television's "Market Makers," Einhorn also discusses activist investing
and high-frequency trading. (Source: Bloomberg)
There
should be no surprise to biotech investors that the mergers and
acquisition (M&A) market and chatter are heating up. The huge buy of
Synageva Biopharma Corp. (NASDAQ: GEVA) by Alexion Pharmaceuticals Inc.
(NASDAQ: ALXN) could be just the start of what may be an exciting
summer and rest of 2015 in the industry.
In a new research note from SunTrust Robinson Humphrey that discusses
the merits of the Alexion deal, the analysts also mention four other
stocks that they think could possibly get swept up in the M&A
excitement. These happen to be companies that other top Wall Street
firms also see as potential buyout candidates: BioMarin Pharmaceuticals
Inc. (NASDAQ: BMRN), Bluebird Bio Inc. (NASDAQ: BLUE), Incyte Corp.
(NASDAQ: INCY) and Vertex Pharmaceuticals Inc. (NASDAQ: VRTX). BioMarin Pharmaceuticals
We featured this company on Wednesday in a post on top biotech stocks to buy.
BioMarin develops and commercializes innovative biopharmaceuticals for
serious diseases and medical conditions. Its product portfolio consists
of five approved products and multiple clinical and preclinical product
candidates.
BioMarin recently completed the submission of the New Drug
Application (NDA) for approval of drisapersen in the United States and
will be filing for approval in Europe this summer. In addition, the
company announced it will share clinical results from the Phase 2 study
of BMN 111 for the treatment of patients with achondroplasia sometime
this quarter and, later in the year, full results from the Phase 1/2
study with cerliponase alfa for CLN2 disorder, a late infantile form of
Batten Disease. ALSO READ: 2 Biotech Buyout Candidates as Antibiotics Stop Working
The SunTrust analysts have the stock rated at Buy with a $151 price
target. The Thomson/First Call consensus price target is $129.32. The
stock closed Wednesday at $119.70, up almost 5%. Bluebird Bio
This company has built an integrated product platform with broad
potential application to severe genetic diseases and T cell-based
immunotherapy. Back in February, it received a Breakthrough Therapy
designation from the U.S. Food and Drug Administration (FDA) for its
LentiGlobin BB305 drug product for the treatment of
transfusion-dependent patients with beta-thalassemia major. LentiGlobin
seeks to treat beta-thalassemia major and severe sickle-cell disease by
inserting a functional human beta-globin gene into the patient’s own
hematopoietic stem cells ex vivo and then returning those modified cells
to the patient through an autologous stem cell transplantation.
Gene therapy is a super-hot area now in biotech, and it makes sense
that a larger company would look to add this pipeline and its potential
blockbuster drugs. Gene therapy last year won $3.0 billion of financing,
up 510% on 2013, according to the Alliance of Regenerative Medicine,
and the pace has continued in 2015, with Bristol-Myers Squibb investing
in Dutch gene therapy company UniQure this month.
SunTrust has the stock rated at Buy and a $115 price target, which
surely will move higher soon. The consensus target is $149.50. Shares
closed most recently at $139.62. ALSO READ: Credit Suisse Adds New Stocks to Buy to Top Picks List Incyte
This is another top company that could be in the sights of a larger
one. In addition to its current validated approach in
hematology-oncology, there is reason to believe the three wholly owned
clinical-stage assets could drive several billion in revenue, something
important for an acquiring company looking to acquire assets. The
SunTrust team is bullish on the company’s rich pipeline of small
molecule therapies in all stages of development, and they see the
company as a key player in the cancer space.
SunTrust has a Buy rating and a $120 price target. The consensus
target is posted at $115.67. The stock closed Wednesday at $100.54 a
share. Vertex Pharmaceuticals
Vertex has long been considered a buyout candidate. It engages in
discovering, developing, manufacturing and commercializing small
molecule drugs for patients with serious diseases in specialty markets.
The company focuses on therapies for the treatment of cystic fibrosis
and hepatitis C (HCV).
Wall Street as a whole is also very positive on the stock, and some
have indicated that the company could have as much as $10 in potential
earnings-per-share power. The consensus also expect that its VX809 for
cystic fibrosis should receive FDA approval.
SunTrust does not cover this stock, but the consensus price target is
set at $136.92. Vertex closed Wednesday at $122.93 per share. ALSO READ: Huge Buyout Highlights 4 Deutsche Bank Biotech Focus Stocks
While there is no guarantee that any of the companies will be bought,
all four of them have seen takeover chatter, for years in some cases.
Only investors with very aggressive accounts should be buyers of these
stocks, given the inherent volatility and risk.
There
should be no surprise to biotech investors that the mergers and
acquisition (M&A) market and chatter are heating up. The huge buy of
Synageva Biopharma Corp. (NASDAQ: GEVA) by Alexion Pharmaceuticals Inc.
(NASDAQ: ALXN) could be just the start of what may be an exciting
summer and rest of 2015 in the industry.
In a new research note from SunTrust Robinson Humphrey that discusses
the merits of the Alexion deal, the analysts also mention four other
stocks that they think could possibly get swept up in the M&A
excitement. These happen to be companies that other top Wall Street
firms also see as potential buyout candidates: BioMarin Pharmaceuticals
Inc. (NASDAQ: BMRN), Bluebird Bio Inc. (NASDAQ: BLUE), Incyte Corp.
(NASDAQ: INCY) and Vertex Pharmaceuticals Inc. (NASDAQ: VRTX).