It's safe to say that the stock market hasn't had the best year so far. Investors have taken their money out of equities in droves in anticipation of impending interest rate hikes in the U.S. and because of geopolitical tensions. But even amid this turmoil, some companies have performed well.
Drugmakers Bristol-Myers Squibb (BMY -0.27%) and Exelixis (EXEL 1.80%) are two prime examples. Are these healthcare companies worth considering as they continue to outperform the market this year? Let's find out.
1. Bristol-Myers Squibb
Drug industry giant Bristol-Myers Squibb probably owes its performance in the market this year in part to strong financial results. In 2021, the company's revenue grew by a solid 9% year over year to $46.4 billion. Bristol-Myers' adjusted earnings per share increased by 17% year over year to $7.51.
The company also had eight blockbuster products during the year, most of which saw their sales increase compared to 2020.
Some of the best-performing ones included cancer drug Opdivo, whose sales in 2021 increased by 8% year over year to $7.5 billion. Bristol-Myers' revenue from anticoagulant Eliquis increased by 17% year over year to $10.8 billion. And sales from Revlimid, a cancer therapy, came in at $12.8 billion, 6% higher than the previous fiscal year.
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Bristol-Myers may also be outperforming the market because its attractive valuation. The company's current forward price-to-earnings (P/E) ratio of 9.4 compares favorably to that of the pharmaceutical industry at 12.3. It's a great time to be a value stock since the market's frothiness has arguably played a role in the recent sell-off.
With that said, there are other reasons to be excited about this stock. Bristol-Myers has an exciting portfolio of pipeline candidates and newer products. The company expects to generate more than $25 billion in revenue from these newer products by 2029. That'll help Bristol-Myers deal with its upcoming patent cliffs. For instance, generic competition for Revlimid started entering the U.S. market this year.
Thankfully, Bristol-Myers planned ahead, and the company will be able to smooth out the losses it will likely incur from older products in the coming years. This healthcare stock is also an excellent option for income-seeking investors.
Bristol-Myers offers a dividend yield of 2.74% -- more than twice the S&P 500's average of 1.27% -- and a conservative cash payout ratio of 29%. As Bristol-Myers offers value and income, it looks like an excellent stock to buy and hold through these turbulent times.
2. Exelixis
Exelixis also reported excellent financial results recently. In 2021, the company's total revenue soared by an impressive 45.3% year over year to $1.4 billion. Exelixis had its crown jewel, Cabometyx, to thank for that result. This cancer therapy continues to grind out new indications. In January 2021, Cabometyx earned regulatory approval with Opdivo as a combination first-line treatment for renal cell carcinoma, the most common form of kidney cancer.
This approval played a crucial role in Cabometyx's performance last year, helping the medicine cross the $1 billion mark in annual revenue for the first time. Exelixis' adjusted EPS for the year soared by 66% year over year to $1.01. Cabometyx is still undergoing many clinical trials. Expect the medicine to earn even more indications and continue growing its sales. This year, Exelixis expects to generate total revenue between $1.525 billion and $1.625 billion.
At the midpoint, that would represent an increase of about 12.5% compared to 2021. While that's less impressive than the revenue growth it delivered last year, it is still respectable in the biotech industry. With that said, Exelixis' reliance on a single product doesn't bode well.
Thankfully, the company is looking to develop newer drugs. It currently boasts a trio of potential cancer medicines -- XL092, XB002, XL102 -- that are undergoing phase 1 clinical trials. The company plans to give updates on these candidates' progress in the second half of the year.
Exelixis' forward P/E of 17.5 is higher than the biotech industry's average of 11.6. Even though it has outperformed the market so far this year, investors should keep Exelixis' relatively rich valuation in mind, as it could cause significant volatility in the short run if the company fails to live up to expectations.
But for those willing to be patient, the biotech could handsomely reward shareholders down the line as it moves beyond Cabometyx.
