May 6, 2020

Today’s news –

Alexion Pharmaceuticals (ALXN 95.32) reported strong first quarter results this morning. Non-GAAP diluted EPS of $3.22 beat all analysts’ estimates. Revenue of $1.445 billion beat the $1.36 billion consensus estimate. All sales levels of the company’s marketable drugs surpassed year-ago numbers.

CEO Ludwig Hantson, Ph.D. commented, “We had a strong first quarter across our global commercial business, driven by substantial growth in the number of patients we’re treating with our medicines. We also made significant progress diversifying our portfolio through business development, with the close of the Achillion acquisition and the announcement that we have entered into an agreement to acquire Portola.

While almost all companies have withdrawn full-year 2020 financial guidance, due to the uncertainties created by the virus pandemic, Alexion provided new guidance this morning. The company lowered 2020 revenue guidance from $5.53 billion to $5.28 billion; raised non-GAAP operating margin guidance from 54% to 55.5%; and lowered non-GAAP EPS guidance from $10.75 to $10.60. (All numbers are mid-points within guidance ranges. Refer to the press release for exact numbers, and for details about current drug trials.) Updated financial guidance does not include any impact from the pending Portola Pharmaceuticals acquisition.

At this point, we’re looking at expected increases in 2020 revenue and profits in the low-to-mid single digits, followed by a year of double-digit revenue and profit growth in 2021.

The stock fell upon news of this week’s Portola acquisition, and continued falling this morning, approaching what I consider to be a normal price support level around 95, based on price chart patterns. ALXN will probably trade in the mid-90’s for a short while (or longer if the broader market weakens), and then rebound toward 110. I aim to give the stock a buy recommendation when the stock establishes a bottom, likely around 95. Hold.

General Motors (GM 22.60) reported solid first quarter results this morning. Adjusted diluted EPS of $0.62 beat the $0.33 consensus estimate. Revenue was $32.7 billion, exceeding the $31.1 billion estimate. The earnings press release details management’s actions toward responding to COVID-19 (both worker safety and manufacturing healthcare supplies), liquidity, reopening auto production and the company’s commitment to electric and autonomous vehicles. The company aims to restart U.S. and Canadian auto production on May 18.

I’m moving GM from Hold to a Strong Buy recommendation, based on the company’s financial strength as it successfully deals with the business lockdowns resulting from the virus pandemic, the favorable response from Wall Street, and the optimism reflected in the price chart. GM has traded consistently between 20-24 for five weeks. The stock is reacting well to the earnings report, up 6% this morning. I anticipate a near-term breakout past 24, at which time the stock could promptly rise to 27 or 30, depending on economic news and price action in the broader market. Strong Buy.

Voya Financial (VOYA 42.73 – yield 1.4%) reported first quarter adjusted diluted non-GAAP EPS of $1.10 this morning vs. the $0.88 consensus estimate. Adjustments to EPS included writedowns for deferred acquisition costs, and for stranded costs associated with the divestment of businesses; and a benefit from prepayment fees and alternative income. The company repurchased $406 million of stock during the quarter. The sale of Individual Life and annuities businesses remains on track for September 2020 and is expected to generate $1.5 billion in deployable capital.

CEO Rodney O. Martin commented, “As a result of the proactive, strategic decisions that we have made during the past few years to significantly de-risk our business portfolio, strengthen our balance sheet, simplify our company and streamline our focus on the workplace and institutional clients, Voya is well positioned for the challenges and headwinds facing the broader economy and our industry. We had $612 million of excess capital as of March 31, 2020, and we continue to benefit from our high free cash flow business mix. Moving forward, we will continue to demonstrate prudent capital management.” (Refer to the press release for additional commentary.)

As I’ve repeatedly mentioned this year, the current stock market downturn is completely different from that of a dozen years ago, at which time housing and financial markets caused the nation’s economic problems. Fortunately, investment and insurance companies not only played no part in our current economic crisis, but they are less affected by COVID-19 business lockdowns than most other industries. Voya Financial remains on track for strong earnings growth.

VOYA is appropriate for aggressive growth investors. The stock is down about 2% this morning, which I find somewhat surprising. A move above 46 would represent the onset of a new run-up. Buy.