Gilead Sciences Is a Buy

Gilead Sciences (GILD) announced fourth quarter ended December 31, 2015 total revenue of $8.5 billion, up 16 percent year-over-year from $7.3 billion during the same period last year. Going forward, Gilead has provided total product sales guidance for the complete fiscal year 2016 and estimates it to be in the range of $30 billion to $31 billion.

Gilead declared fourth quarter of 2015 non-GAAP net income of $4.89 billion or $3.32 per diluted share, up 26 percent year-over-year from $3.88 billion or $2.43 per diluted share in fourth quarter of 2014.
Moving ahead, Gilead forecasts full year 2016 diluted EPS to be in the $1.10 to $1.16 range.

The global biopharmaceutical research company reported continued year-over-year growth in both its top and bottom lines primarily driven by healthy growth in total product sales for the company.

Impressive growth  

Gilead is continuing to grow its top line year-over-year, allowed by sales expansion over the period. The year-over-year expansion in adjusted operating margin is mainly driven by smaller operational expenditure growth compared to the top line growth and improved gross margin from an attractive product mix.

The biopharmaceutical major seems focused on delivering outstanding non-GAAP diluted EPS and impressive cash flows from operations with continued sequential and year-over-year growth. This is primarily driven by superior collections somewhat offset by current liabilities linked to cash payment timings.

The ongoing expansion in both the company’s top and bottom lines is mainly due to a healthy acceptance of new and innovative HIV-related treatment drugs being recently introduced by the company.

Gilead has delivered 16% year-over-year total product sales growth in the fourth quarter of 2015 compared to the same period last year in addition to an extremely well-diversified product sales by geography spread across the US, Europe and other international locations (including Japan). The continued product sales expansion is driven by rising customer traction for the company’s unique set of HIV, HBV, HCV and NASH drugs. Highly diversified product offerings by geography are believed to be the key strength of this company, positioning it for sustainable long-term growth.

End-market strength  

There is growing international prevalence of HCV, which is expected to be nearly 185 million and spread across both the core markets of the US, Europe, and Japan as well as the key emerging markets including Latin America and other parts of Asia.

The attractively well-diversified and growing product sales portfolio of Gilead globally is believed to deliver impressive company growth somewhat offset by a23% year-over-year increase in the company’s non-GAAP R&D expenditures for the fourth quarter of 2015.

Importantly, Gilead has announced first quarter of 2016 quarterly cash dividend of $0.47 per share, an increase of 10% from $0.43 declared earlier and to be paid on March 30, 2016 to all the key shareholders as of March 16, 2016. In line with its continued commitment to deliver improved shareholder returns, this strategic dividend was paid through the planned repurchase of 29.3 million shares or $3.1 billion worth of stock at an average price of $103.94 in the quarter.

The company still has $8 billion worth of 2015 share repurchase programs outstanding in January 2015, from a total $15 billion authorization as of December 31, 2015. In total, Gilead has returned approximately 77% of free cash flows including dividends and strategic warrant settlements for the period of January 2010 until December 2015.


Overall, the investors are advised to “hold” their position in Gilead Sciences Inc., considering significant long-term growth prospects of the company but currently a weaker financial position and notable total debt of $22.18 billion against smaller total cash position of $14.61 billion. That restricts the company from continuing with its daily operations profitably. However, the profit margin of 55.48% seems impressive. The PEG ratio of 1.79 indicates healthy company growth.
Published on Apr 8, 2016
By Subhen Mittra

Copyrighted 2020. Content published with author's permission.

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