ResMed is already an industry leader in sleep apnea therapies, an area that's expected to grow as our population ages. Walgreens Boots Alliance is jumping onto the trend toward value-oriented healthcare services, and AbbVie's huge stable of drugs and pipeline give it a diversity that protects its long-term outlook.
Don't sleep on ResMed
ResMed stock is up more than 20% this year, and over the past five years the stock's total return is up more than 320%, compared to 109% for the S&P 500. The company is the leading manufacturer of sleep apnea therapies, including positive airway pressure devices and masks.
Only half of the company's revenue comes from selling sleep apnea machines, however -- most of the other 50% is from replenishing the add-ons that go with the machines, including new filters, masks and tubing, along with sales of its software-as-a-service (Saas) platform for out-of-hospital care providers. That helps explain why the company's revenue has risen more than 62% over the past five years.
In its fiscal year 2021, which ended on June 30, the company reported yearly revenue of $3.2 billion, up 8% over 2020. Net income was $474.5 million, down 24% as the company's expenses rose during the pandemic. However, net income seems to be picking up: Fourth-quarter net income was $195.1 million, up 10% year over year.
The company sees plenty of growth possibilities in sleep apnea, stating that more than 80% of people with sleep apnea go without being diagnosed and could be helped by ResMed's devices. It stands to reason that, as our population ages -- and in some cases, grows more overweight -- the need for sleep apnea devices will grow. The global market for sleep apnea devices is expected to reach $6.1 billion by 2028, achieving a compound annual growth rate (CAGR) of 6.2% over that period, according to a report by Grand View Research.
Walgreens' shift should boost numbers
Walgreens Boots Alliance's stock is up more than 20% this year. The pharmacy company is a Dividend Aristocrat, having increased its dividend for 46 straight years, including a 2.1% raise this year to $0.475 per quarterly share, giving it a yield of 3.89%.
What's exciting about this stock is the new direction it is headed in. Company CEO Rosalind Brewer said in the company's fourth-quarter and fiscal 2021 earnings call that Walgreens is pivoting to make its retail outlets into locations for primary care, post-acute care, and home care medical needs. At the core of the move is a new segment, Walgreen's Health. The segment utilizes the company's investments in CareCentrix, which focuses on the post-acute and home care sectors, and VillageMD, which focuses on value-based primary care. Walgreen said it expects its number of co-located WBA and VillageMD locations to jump from 52 to 80 by the end of this year. The company's stock rose last week on the announcements -- but even with that, I believe it is a bargain based on its price-to-earnings ratio of 18.3.
The company just closed its fiscal 2021 books. It reported $132.5 billion in revenue for the year, up 8.6% over 2020. Its diluted earnings per share for the year were reported as $2.93, compared to $0.52 in 2020.
AbbVie is a solid play for the future
AbbVie share price movement has been practically flat so far this year, but I think the underlying business has been undervalued considering its revenue and impressive dividend. I think the reason for the current undervaluation is investors' concern about the eventual revenue drop when Humira, its star immunology drug, loses patent protection in 2023.
Let's start with the company's dividend, which has been raised 225% since the company split off from Abbott Laboratories in 2013. Counting its time with Abbott, AbbVie is considered a Dividend Aristocrat with 49 consecutive years of quarterly dividend raises. This year it lifted its dividend by 10.2% to $1.30 a share, which translated to a yield of around 4.84% as of this writing. That's nearly four times the typical dividend yield of a S&P 500 company.
Through the last six months, AbbVie reported net revenue of $26.9 billion, up 41.2% year over year. Net earnings were listed at $4.3 billion over six months, up 90% compared to the same period last year. EPS through six months was reported at $6.06, compared to 4.76 in the first six months of 2020.
While Humira's sales growth is already slowing thanks to biosimilar competition in Europe, the slack is being taken up by AbbVie's newest immunology drugs, Skyrizi and Rinvoq. AbbVie CEO Richardo Gonzalez said in the company's second-quarter earnings call that he expects the pair to bring in $4.6 billion or more this year combined. Through the last six months, Skyrizi brought in $1.2 billion and Rinvoq brought in $681 million, and the company plans to expand their applications. It just got approval to use Skyrizi in Europe to treat adults with psoriatic arthritis, and Rinvoq is coming off what the company said was a successful phase 3 trial to treat ankylosing spondylitis, a type of arthritis of the spine.
As additional uses are found for those two, their profits should continue to grow. The company is also seeing strong sales from Botox Therapeutic ($1.1 billion in the first six months of the year) and Botox Cosmetic ($1 billion through six months).
On top of that, the pile of money AbbVie has been making from Humira has helped fund the company's research and development efforts. Its pipeline is immense and promising: the company says it expects as many as 10 new approvals next year for its therapies.