a stock to keep for the long term?

Hikma Pharmaceuticals (GB:HIK) shares started a downtrend after reporting its interim results for 2022 on August 4 – but the stock could offer a decent option for longer-term investors.

The company’s revenue was flat at $1.2 billion, as revenue growth in the injectables and branded drug segments was offset by a decline in the generics segment. The company has lowered its forecast for generics for the full year.

Shareholders reacted negatively and the title lost 30% of its value ever since. Overall, the stock has traded down 46% over the past year.

Looking closer at the numbers, the performance is not that bad and the recent drop has led to a buying opportunity for the shares.

What does Hikma Pharmaceuticals make?

Hikma manufactures and sells a wide range of generic, branded and specialty medicines for global customers. The company has a product portfolio of approximately 670 drugs and 32 manufacturing plants.

Product categories include Oncology, Pain Management, Antibiotics, Respiratory, Cardiovascular and many more.

The Company operates through three business segments: branded products, injectables and generics. Some of its products are Amoxicillin, Prednisone, Robaxin, Argatroban, Amoclan and Suprax.

The road ahead

Revenues from the Company’s generics segment were down 18% due to tough competitive market conditions, particularly in the United States. Performance was also impacted by some product delays, which are now expected in 2023.

The company expects its generics revenues to be between $650 million and $675 million for the full year 2022, instead of $710 million to $750 million as previously announced.

The company is positive about new launches, including Ryaltris and Xyrem, which will bring the generics business back to growth in 2023.

Hikma is also focusing on its injectable segment, which is a high-margin business. This segment saw its operating profit increase by 12% and its operating margin stand at 38.8%. The company further expanded its European market by launching its injectable business in France. Additionally, it is investing more in the MENA region to locally produce injectables in the region.

Hikma Pharmaceuticals dividends

The company announced an interim dividend of 19 cents per share, up from 18 cents last year. The the company’s dividend yield is 3.03%, above the industry average of 1.57%.

Time and time again, the company has demonstrated its intentions to increase shareholder returns. Although the yield is not the highest in the industry, it is stable and supported by earnings.

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Is Hikma Pharmaceuticals a buy?

According to TipRanks analyst rating consensus, Hikma is a Moderate Buy. It has a total of five ratings, including two buy recommendations and three hold.

The HIK target price is 2,029.4 pence, which is a 51.1% change in price from the current level. The price has a high and low forecast of 2,937p and 1,750p, respectively.

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Conclusion

Despite its recent woes, the company’s product expansion strategy will lead to more growth opportunities. A diversified portfolio, combined with its dividend history, makes it an attractive opportunity for investors.

Disclosure