Industry Analysis - Biotechnology

clatteringlippsBiotechnology

Dec 5, 2012 (4 years and 9 months ago)

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Industry Analysis



By:


Ian, Steve, Conor, Jason and Nicholas

Top 15

1. Biotechnology

2. Health Care Distributors &
Services

3. Drug Retail

4. Tobacco

5. Homebuilding

6. Construction & Farm
Machinery & Heavy Trucks

7. Consumer Finance

8. Pharmaceuticals


9. Casinos & Gaming

10. Airlines

11. Systems Software

12. Health Care Facilities

13. Environmental Services

14. Health Care & Equipment

15. Health Care Supplies

Healthcare Distributors and
Services


Neutral to negative investment outlook by
Business Week


18% price increase (ttm, Yahoo! Finance)


Healthcare demand is always high


Stable revenue streams and consistent gross
margins


Small growth at mature stage of business


Chance of government intervention


NovaMed Inc. (NOVA) and Quest Diagnostics
(DGX)


Biotechnology


Positive investment outlook by Business Week


7.8% price increase (ttm, Yahoo! Finance)


Potential for large return


Numerous micro and small
-
cap companies


Potential for large loss


Many have no revenue and burn cash quickly


OSI Pharmaceuticals (OSIP) and Cell
Therapeutics (CTIC)


Pharmaceuticals


Investment outlook is neutral



Index dropped 5.6% YTD



Flood of patent expirations offers opportunities for generic
manufacturers



Improved earnings prospects in 2005, and historically low
P/E multiples



Weakness in drug stocks reflect political uncertainty



Possible increased reimportation of drugs from Canada



Merck (MRK) and Boston Scientific Corp (BSX)

Consumer Finance


Investment outlook is positive



Consumer Finance Index gained 4.1% YTD



Margins of credit card issuers to expand



Higher long
-
term interest rates YoY should help drive
greater loan growth



Pricing pressures will remain intense though



Balances and transaction volumes weaker than expected



Bank of New York (BK) and Fifth Third Bancorp (FITB)

Systems Software


Investment outlook: Neutral


As of August 20
th
, Systems Software Index down 6.2%


Long
-
term growth potential in the web technologies and
web services areas


Predicted lower double digit PC software sales growth
over the next year


Growth in software spending has slower than previous
quarters


Example Stocks: Microsoft (MSFT), Adobe Systems Inc.
(ADBE)

Health Care Facilities


Investment outlook: Neutral


As of July 30
th
, the Health Care Facilities Index
declined 13.2%


Managed care providers will see continued
earnings growth


Estimated 10% revenue growth resulting in 10
to 15% gains in EPS for the rest of the year


Continued problems with bad debit expense
throughout the industry


Example Stocks: Tenet Healthcare Group (THC),
Healthsouth Corp. (HLSH)


IT Consulting Services


Negative Outlook by Business Week


-
19.4% YTD Decline


Possible growth through acquisitions and
partnerships


Modest improvement in 2005


Softness in IT spending


Weak demand for consulting services


Unisys (only S&P 500 in industry); Hewitt
Associates


Electric Utilities


Neutral Outlook by Business Week


4.6% YTD Growth


Economic recovery will boost energy demand


Look for companies with strong balance sheets
and growing dividend


High level of pension costs


Many companies have high debt and liquidity
problems


Exelon Corp., National Grid Transco PLC


THE END