With earnings season about to kick off, investors are being forced into a different sort of earnings season. Investors love looking for companies that they believe will beat earnings expectations. The problem is that many of the companies will be posting much lower earnings due to the pandemic having much of the economy in various phases of lockdown for the better part of the past six months.
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24/7 Wall St. has been reviewing many sectors for leadership heading into earnings. One area that can offer some defensive strategies is biotech and pharmaceuticals. With many companies seeking fortunes from COVID-19 vaccines and treatments, the investors who are looking beyond the current climate may focus on the companies that are already generating sales and are profitable.

Investors also are looking for opportunities in which Wall Street is increasing its expectations and targets heading into earnings. There are of course no assurances that every company will live up to its potential, but investors still look for that safety and upside that has been given upside ahead of earnings.

It is hard to imagine that many of the top biotech companies are valued at the same as some of the less favorable pharmaceutical stocks. Even value investors may find some attractive valuations at the current time.

We have used Refinitiv for consensus expectations, and additional color has been added on each company.

Alexion Pharmaceuticals

Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) recently saw its shares surge after a business update included increased guidance for 2020 and showed continued revenue growth expectations out to 2025. Alexion’s stock was considered an “underwhelming case of boredom” until that update, which sent the shares higher. One difficult situation here is that Alexion’s valuation is barely 11 times earnings, despite expected income and sales growth in 2020 and 2021.

Wedbush Securities has been consistently positive here, with an Outperform rating and a $156 price target. The firm believes that Alexion can diversify away from Soliris, and it sees up to 10 launches that will contribute to growth ahead. The firm even called out its drug pipeline as representing a call option with multiple upside levers. RBC also chimed in after the update and reiterated its Outperform rating and raised its target price to $139 from $136.

Alexion’s recent $124.00 stock price is within a 52-week range of $72.67 to $127.77. The company now has a $27 billion market cap, and its consensus price target is $142.16. For some added juice, note that many investors believe that Alexion is a potential buyout candidate.

Amgen

Amgen Inc. (NASDAQ: AMGN) recently saw its stock take a hit after a pivotal heart failure drug study achieved its endpoint with statistical significance but still left investors with some concerns. While the stock suffered that disappointment, investors took notice that Amgen was added to the Dow Jones industrial average as Pfizer’s replacement. Some will interpret this to mean Amgen’s earnings expectations are manageable.

Despite a downgrade to Hold from Buy at Truist Securities, Amgen still has a $263.50 consensus target price that implies close to 13% upside, after considering its 2.6% dividend yield. Oppenheimer recently raised its price target to $280 from $270. Credit Suisse even sees Amgen rising up to $290, with more than 20% in implied upside.

Amgen is still growing its sales and earnings, but it is barely valued at 15 times expected earnings. Its $239 stock price also generates a market capitalization of $140 billion, which currently is unrivaled in biotech. Amgen has a 42-week trading range of $177.05 to $264.97.
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Gilead Sciences

Gilead Sciences Inc. (NASDAQ: GILD), once the king of biotech, has seen its growth peter out. It was not even the biotech chosen to replace Pfizer in the Dow. Gilead also has been using some leverage to make acquisitions in an effort to diversify its sales and to get a deeper pipeline in cancer and other drugs. Its remdesivir is also shown to greatly reduce the healing time in COVID-19 patients.

With Gilead shares still stuck close to $64, RBC Capital Markets recently raised its price target to $86 from $82. SVB Leerink has an Outperform rating but, despite being lowered, its target price still $88. Prior to the acquisition announcement, Oppenheimer reiterated its Outperform rating and lifted its target to $105.

Gilead remains a biotech that trades like a study low-growth big pharma stock. It has an $80 billion market cap, and the consensus price target is $78.92. Gilead is also valued at only about 10 times earnings, and the $6.63 per share in earnings from 2019 is now expected to hit $6.99 in 2020 and then $7.00 in 2021.

Neurocrine Biosciences

Neurocrine Biosciences Inc. (NASDAQ: NBIX) has nearly a $10 billion market cap, and its $103.50 share price compares to Refinitiv’s consensus earnings estimates of $2.46 per share in 2020 and $4.03 in 2021. Sales are expected to rise 44% to $1.14 billion in 2020 and then to $1.43 billion in 2021.

BofA Securities recently added the stock to its prized US 1 list. The firm’s official rating is Buy, and it carries a $134 price objective. The recent addition to the US 1 List ahead of earnings on November 9 calls for strong sales of Ingrezza, after sales momentum in the second quarter despite headwinds from COVID-19. Note that Neurocrine’s sales force is back in the field and that its market penetration may be only one-fifth of its potential. The firm sees a floor valuation here that is supported by several revenue streams from approved products, such as Ongentys and AbbVie-partnered Orilissa and Oriahnn. The firm also believes that the midstage pipeline is undervalued.

At $103.50 a share, Neurocrine has a consensus target price is $140, and its 52-week range is $72.14 to $136.26.

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