When the FTSE 100‘s second largest company rises significantly, that means many billions of pounds of market value are added. That’s what happened today (25 April) after the AstraZeneca (LSE: AZN) share price surged 5.5% to reach 12,004p.
As I write, the pharmaceutical giant is now sporting a £183bn market cap. That puts it just behind oil behemoth Shell (at £184bn).
What caused this large share price movement? Let’s find out.
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A quarterly masterclass
The firm has just reported its first-quarter results today. Going into the release, analysts were forecasting core earnings per share (EPS) of $1.92 on total revenue of $11.84bn (at constant exchange rates).
The drugmaker breezed past these expectations. It achieved EPS of $2.06, a 13% year-on-year increase, on revenue of $12.68bn (a 19% rise).
Therefore, this represented a top-and-bottom earnings beat. And that’s what has sent the stock up.
This growth was driven by demand for its blockbuster oncology drugs, including Tagrisso for lung cancer and Calquence for leukaemia. Total oncology revenue grew 26% to $5.12bn.
Its Imfinzi (durvalumab) cancer treatment was approved in China in November. This is a huge but also complicated market. The firm appears to be working deftly with partners and regulators there. In the quarter, Imfinzi revenue increased 33% to $1.11bn.
Meanwhile, its other businesses that include rare diseases, plus respiratory and immunology, also saw double-digit growth.
On the dividend front, the company had already announced its plan to raise the annual payout by 7% for 2024. The yield stands at 2.2%.
Looking ahead, management reiterated its full-year guidance, which is for total revenue and core EPS to both rise by low double-digits to low-teens.
So there was no hat-trick here (a double beat and a guidance raise). Overall though, this was a quarterly masterclass from a truly wonderful company.
Acquisitions
Now, one issue to bear in mind§ is that the firm is investing heavily in R&D and on marketing for new drug launches. Spending rose about 18% to $2.7bn for such things during the quarter.
Plus, it’s been getting the chequebook out for a few acquisitions recently. In February, for example, it snapped up Gracell Biotechnologies, a clinical-stage biopharma focused on cell therapies for cancer and autoimmune diseases, for around $1.2bn.
In the previous quarter, AstraZeneca reported an earnings miss, and the share price dropped 7%. So the stock can be quite volatile for a number of reasons, including rising costs and inevitable drug trial failures.
The stock is trading at around 17.5 times forward earnings. I don’t see that as overvalued.
The ageing population mega-trend
I’m very bullish on AstraZeneca long term and invested in the stock earlier this year.
The firm appears to have massive growth potential as global populations live longer. This is particularly the case in China, where the population of people over 60 years old is projected to reach 28% by 2040, according to the World Health Organization.
Over 20% of the firm’s revenue now comes from Asia and I expect that to increase steadily in future.
Meanwhile, its R&D pipeline is absolutely packed to the rafters with possible future blockbuster drugs (those that exceed $1bn in annual sales).
Therefore, despite the stock nearing an all-time high, I’d still consider investing in it today.
