Amgen Earnings Jump After Successful Buyback Program

Amgen Inc. (AMGN) is a biotechnology firm that discovers, develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses.

Q2 2012 Highlights

The company reported striking figures for Q2 2012. Amgen’s total revenues increased 13 percent to $4,477 million, with 8 percent product sales growth driven by strong performance across the portfolio. Amgen renegotiated its agreement with Takeda to grant exclusive worldwide development rights for motesanib, recognizing income of $206 million in other revenues. Adjusted net income increased 12 percent to $1,433 million.

The company’s adjusted EPS is $1.83, or a 34 percent up. GAAP EPS increased 29 percent to $1.61 and GAAP net income increased 8 percent to $1,266 million. Remarkably, Amgen generated an estimated $2.2 billion of free cash flow. Four AMG 145 Phase 2 studies have successfully completed and the Company plans to initiate Phase 3 development in early 2013.

Overall, the company grew adjusted net income by 12 percent, but the earnings per share grew by an excellent 34 percent. Evidently, the share buyback program worked for this company. The company considerably maximized shareholder’s wealth in the process.

GROWTH AND BALANCE SHEET

Amgen has a forward P/E of 12.58 times while PEG is 1.66. The price to free cash flow is 15.10 times. The company has a solid balance sheet with a quick ratio of 3.36, current ratio of 3.68, and debt to equity ratio of 1.27. Long-term debt to equity are also sufficient and impressive at 1.14.

VALUATION

The stock shows little volatility at beta of 0.43. Its most recent closing is $86.80 which is close to analyst’s mean target of $87.82. We expect the stock to rise following the developments on pending drugs with the FDA and its quick expansion through acquisitions.

RECENT NEWS

Thursday, September 20 – Amgen (AMGN) says the FDA has approved a new indication for Prolia as a treatment to increase bone mass in men with osteoporosis at high risk for fracture. Prolia is the first FDA-approved subcutaneous injection administered every six months. Studies of men with low bone mineral density who took the treatment resulted in significantly greater bone density gains when compared to a placebo.

Wednesday, September 12 – Some comments from Amgen’s (AMGN) CFO Jon Peacock out of the Morgan Stanley Healthcare Conference: Pipeline becoming more visible, reiterates FY12 EPS and revenue growth forecasts; biggest growth opportunities are outside the U.S., so consequently, the company will be looking to step up its international business; plans “meaningful” increases to its dividend over time, with more moderated buybacks through 2015.

Thursday, July 26 – Amgen (AMGN): Q2 EPS of $1.61 beats by $0.07. Revenue of $4.48B (+13% Y/Y) beats by $400M. Shares +3.4% AH.

Thursday, July 26 – More on Amgen (AMGN): Q2 beats across the board on a 13% Y/Y jump in total revenue. Product sales growth was driven by strong performance across the portfolio. Xgeva sales total: $179M. For 2012, the company guides higher, now seeing an EPS of $6.20 to $6.35 on revenue of $16.9B to $17.2B. Street estimates are for earnings of $6.15 per share on $16.37B in revenue. Shares +4.4% AH.

RECOMMENDATION

The stock is currently 66.69 percent from the 52W low and 0.24 percent from the 52W high. Recently, Robert W. Baird issued a downgrade rating from outperform to neutral, while UBS issued an upgrade from neutral to buy. They expect the stock to trade at $84 and $96 respectively. We rate AMGN as a BUY due to its strong revenue outlook and increasing dividends. The company is also financially able to support future demands. We expect  the AMGN products will create a tight ecosystem that will create a good lead for the company in the industry.