One of the metrics that analysts and strategists follow closely is the three-month earnings revision ratio. While analysts continue to make more downward to upward revisions, the number is improving. In a new report, Merrill Lynch says that one sector is leading the way in upward revisions and may be the best short-term bet for investors.

The Merrill Lynch’s equity and quant strategist Savita Subramanian and her outstanding staff point out that health care is the only sector besides financials with more positive than negative revisions to earnings over the past three months. We screened the Merrill Lynch health care universe and found four pharmaceutical stocks rated Buy with outstanding short-term and long-term potential. The Merrill Lynch team sees the sector as a top yield play and the stocks are underowned by portfolio managers.

Abbott Labs

This top pharmaceutical stock has very solid growth potential. Abbott Laboratories (NYSE: ABT) is a leading diversified global health care company that develops, manufactures and markets branded generics, medical devices, nutritional products and diagnostic solutions. The company recently agreed to acquire the equity in Minnesota-based Tendyne Holdings that it does not already own for $250 million plus future payments tied to regulatory milestones. The Merrill Lynch team likes the purchase and the way the company is putting its substantial balance sheet to work.

The company also offers a diversified large cap play as earnings are split between five well-positioned business segments: Nutritionals, Vascular, Generic Pharmaceuticals, Diagnostics and Diabetes.

Abbot Labs investors are paid a 1.9% dividend. The Merrill Lynch price target for the stock is $53, and the Thomson/First Call consensus target is $53.34. Shares closed Wednesday at $50.48.

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Eli Lilly

This stock checks in high on the global pharmaceutical lists at many top Wall Street firms. Eli Lilly and Co. (NYSE: LLY) is somewhat surprisingly out of consensus with portfolio managers at mutual fund and hedge funds. It also has more Neutral ratings than Buy ratings on Wall Street.

The company reported very solid second-quarter GAAP earnings per share (EPS) of $0.56. On a non-GAAP basis, the EPS were $0.90, beating consensus estimates. On a reported basis, the 2015 full-year earnings guidance was upped to between $2.20 to $2.30 per share.

While generic competition is eating into profits with the company’s Cymbalta and Evista drugs, and currency headwinds took a toll on overseas sales, the drug giant still affirmed forward expectations. Its new cancer drug Cyramza won FDA approval for label expansion earlier this year. It treats patients suffering from metastatic colorectal cancer. This was the fourth Cyramza approval in a one-year period; it already has approval to treat advanced or metastatic gastric or gastroesophageal junction adenocarcinoma and metastatic non-small cell lung cancer. Cyramza has so far generated sales of $67.5 million.

The Merrill Lynch team loves the company’s product pipeline and they think that the recent Phase 3 data on evacetrapib was also very solid and just another big pipeline positive for the company.

Eli Lilly shareholders are paid a solid 2.4% dividend. The $101 Merrill Lynch price target is well above the consensus target of $90.65. Shares closed Wednesday at $84.73.

Merck

Merck & Co. Inc. (NYSE: MRK) remains a leading health care company on the focus lists of many of the top firms we cover. Its numerous prescription medicines, vaccines, biologic therapies and consumer care and animal health products are provided to customers in more than 140 countries. Merck is the world’s fourth-biggest drugmaker by revenue and boosted its annual profit forecast after the company beat first-quarter earnings and sales estimates, fueled by higher demand for vaccines and diabetes treatments.

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The second-quarter earnings also were very solid as the company reported adjusted EPS of $0.86, beating estimates. Revenue for the quarter was at $9.8 billion, matching the consensus estimate.

Merck shareholders are paid a solid 3.06% dividend. The Merrill Lynch price target is $68, and the consensus target is posted at $65.35. Shares closed Wednesday at $59.10.

Pfizer

This stock could be offering investors the best value at current trading levels. Pfizer Inc. (NYSE: PFE) rocked Wall Street by announcing a gigantic $15.2 billion purchase of Hospira, a top provider of sterile injectable drugs, including those used for acute care and cancer treatment, and infusion technologies and biosimilars, which are subsequent versions of drugs whose patents have expired. The company’s drug Ibrance was approved for advanced breast cancer by U.S. regulators more than two months ahead of schedule, letting the drugmaker proceed with one of its most promising new blockbusters, a turn-of-events that Wall Street likes.

With a strong pipeline and the fact that Pfizer is the world’s largest drug manufacturer by sales, many analysts feel the company can generate higher long-term revenues through the accelerated growth of its new drugs over the next five years, with Ibrance leading the way. Many on Wall Street also think that Pfizer will continue with aggressive mergers and acquisitions activity, and then ultimately break the company up to unlock the overall immense value.

Pfizer investors are paid a solid 3.11% dividend. The Merrill Lynch price target is set at $36, but the consensus target is higher at $38.56. Pfizer closed Wednesday at $35.82.

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The key reason for owning top pharmaceuticals is twofold: outstanding total return through share price growth and dividends, as well as portfolio safety. In a big sell-off, pharmaceutical stocks are among the last to hit the sales tape. With the best earnings revisions numbers, and what could be very dicey road ahead, they make very good sense now.

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