Proactive Investors - AstraZeneca PLC's underlying quarterly performance shows it is "far from a one-trick pony" and its share price premium over peers is entirely warranted, broker Shore Capital said.
Alongside the announcement of a US$1bn acquisition, second-quarter results from the biggest company on the FTSE 100 showed a stronger top line of U$11.4bn than consensus forecasts, up 6% as the unwinding of Covid-19 medicines created a drag.
Excluding these the underlying business delivered strong 17% constant-currency growth, said Shore Cap analyst Dr Sean Conroy, with notable performances from oncology drugs Imfinzi and Tagrisso, as well as diabetes medicine Farxiga and kidney disease treatment Ultomiris. Also Conroy highlighted another consecutive quarter of growth in China where sales were up 7% to US$1.44bn.
The dominant feature for AstraZeneca (NASDAQ:AZN)'s shares recently, the analyst said, has been "the absence of two words, ‘clinically meaningful’" from the headline announcement for the Phase III TROPION lung cancer trial, which spooked investors at the start of this month.
"Whilst expectations were high ahead of this readout and the share had clearly been priced for perfection, we still view the initial outcome communicated as positive and await to see data presented in detail before we draw any firm conclusions on dato’," Conray wrote in a note to clients.
"Either way, the recent movement in the share fundamentally looks overdone, and we see this robust set of results as a good opportunity for people to revisit AZN’s premium growth story, which is underpinned by its broad blockbuster base and an industry leading pipeline which we believe is well positioned to sustain growth longer term."
On the shares' valuation, he pointed out that they trade for around 16 times 2024 forecast earnings, broadly in line with the US and European peer group on a p/e of circa 15.5x.
"We continue to believe a premium is warranted based on its earnings growth and pipeline prospects," Donray said, reiterating a 'buy' rating and that Shore's 'fair value' of 13,000p per share that implies nearer 18x for AZN "is readily justifiable".