Gilead Sciences, Inc. (NASDAQ:GILD) is one of my top choices for any stocks moving forward through 2014 into 2015. This company is a behemoth of a biopharmaceutical company. It designs, discovers, develops, and commercializes medicines for the treatment of a number of different life threatening diseases in North America, South America, Europe, and the Asia-Pacific. The company’s flagship products include Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost, and Vitekta for the treatment of human immunodeficiency virus (HIV) infection in adults. It also has Sovaldi, Viread, and Hepsera products for the treatment of liver disease. Further, it offers Letairis, an endothelin receptor antagonist for the treatment of pulmonary arterial hypertension and Ranexa for the treatment of chronic angina. Another popular product is Tamiflu, an oral antiviral capsule for the treatment and prevention of influenza A and B. Further, it has a lot of other potential blockbusters in its pipeline. Now, the purpose of this article is to discuss why I believe the party is not going end any time soon for this stock.
Why do I think it is going to be a party on situation? Well, because the company is absolutely doing phenomenally. Total revenues for the second quarter of 2014 increased to $6.53 billion compared to $2.77 billion for the second quarter of 2013. Yes, for those math whizzes reading that is more than a doubling of sales. Product sales increased to $6.41 billion compared to $2.66 billion for the second quarter of 2013. Net income was $3.66 billion, or $2.20 per diluted share compared to $772.6 million or $0.46 per diluted share for the second quarter of 2013. That is nearly a 500 percent increase! Non-GAAP net income for the second quarter of 2014, was $3.93 billion, or $2.36 per diluted share compared to $839.7 million or $0.50 per diluted share for the second quarter of 2013. It was truly an amazing quarter.
Gilead is also cash rich. That might even be an understatement. At the end of the quarter it had $9.58 billion of cash, cash equivalents and marketable securities compared to $6.86 billion as of March 31, 2014. During the quarter, Gilead generated $4.19 billion in operating cash flow. Where did the money go? Well Gilead spent $1.2 billion to repurchase 15.2 million shares during the quarter and has approximately $1.7 billion remaining in the current repurchase plan. While that buyback is set to be completed, in May, the company announced that its Board of Directors authorized an additional repurchase of up to $5 billion of the company’s common stock following completion of the current authorization. So expect the company to support its own stock price as well as increase earnings per share, thus increasing shareholder value.
Looking ahead, the company is set to hit new sales records. The stock, should continue to press forward and make new highs, barring a market wide selloff. What was the icing on the cake for this near perfect quarter was that the company raised guidance. It now sees almost a doubling of net product sales for the year compared to its last update back in April. Net product sales are expected to be $21.0 billion to $23.0 billion for the current fiscal year with a gross margin of an unheard of 85 to 88 percent. It plans to have spent $2.3 billion on research and development as well as another $2.4 billion on administrative expenses. And IT GETS BETTER. The company now sees the effective tax rate dropping from around 29 percent to anywhere from 17.5 to 20 percent. Wow. I believe this stock will easily see well over $100 by 2015 and thus maintain my buy rating and am raising my price target to $107.
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