Today I am looking at three blue-chip beauties set to hit the high notes.
AstraZeneca
It is no secret that medicines play AstraZeneca (LSE: AZN) (NYSE: AZN.US) has long been beset by patent expirations across a number of revenues-driving labels.
Exclusivity losses on such products as Symbicort and Seroquel has smashed revenues in recent years, and in February a US court found that the patent for its Pulmicort Respules was invalid, adding to the company’s existing headaches — AstraZeneca was due to lose protection from 2018. The emergence of generic competition for its critical Crestor and Nexium labels are also set to drive group sales steadily lower until end-2016 at the earliest.
Still, AstraZeneca has devoted vast sums to resuscitate its product pipeline, and received a record six approvals in 2014 as a result. And last month the pharma play received positive Phase III trials for its PINNACLE programme designed to combat COPD — the company intends to file for global regulatory approvals this year following this testing.
As well, AstraZeneca also remains hot on the acquisitions trail, and earlier this year purchased Activis’ respiratory business in the US and Canada for $600m plus royalty add-ons. And once the company’s lab-building programme across North America and Europe is complete in the next few years, I expect R&D to really take off at the Cambridge firm and deliver rampant turnover growth.
Rolls-Royce Holding
Diversified engineering play Rolls-Royce (LSE: RR) has suffered a spate of problems over the past year or so. More recently a declining oil price has whacked the outlook for its Marine division, a phenomenon which has forced the company to downgrade its 2015 profits forecasts. And claims of corruption in China and Indonesia have now spread to Brazil, a development which is sure to grab the attention of the Serious Fraud Office which is already investigating dealings at the business.
Of course the prospect of reduced spend from the oil sector is a worry for Rolls-Royce’s top line. But over the long-term, I believe that the Crewe business’ market-leading products across a wide array of industries should underpin terrific earnings growth.
In particular, Rolls-Royce’s top-tier position with the world’s biggest planebuilders should deliver handsome rewards as surging civil aerospace volumes drive demand for its Trent engines, not to mention the firm’s TotalCare maintenance package. Indeed, Rolls-Royce inked a $1bn deal with Air China just last week to power 15 of the carrier’s Boeing Dreamliner aircraft.
With the company’s Aerospace global restructuring drive also bringing it closer to emerging markets and stripping down the cost base — Rolls-Royce announced another 200-odd job cuts in March, on top of the 2,600 posts announced in November — I believe that the firm is in great shape to deliver strong returns in coming years.
SABMiller
Like many of its alcohol sector peers, beer giant SABMiller (LSE: SAB) has been whacked by declining off-take from developing markets, and in particular that of China. Indeed, a 7% decline in net producer revenues (NPR), at constant currencies, from the Asian powerhouse during October-December pushed NPR for the Asia Pacific region 2% lower during the period.
Although SABMiller also saw North American revenues drop 1% in the quarter, strong performance across its other key territories drove group NPR 4% higher during the period. The company’s broad range of beverage labels, which includes Fosters, Peroni and Castle, has helped to drive business in critical Latin American and African marketplaces, and revenues in these places advanced 5% and 7% respectively in the third quarter.
The brewer still faces a huge drag in the form of adverse currency movements — indeed, on a reported basis group NPR actually dropped 5% in October-December. Still, I believe that SABMiller’s vast investment in new territories should deliver handsome earnings expansion on a long-term time horizon on the back of rising personal income levels and booming population growth.