In an unusual divergence, stocks belonging to the defensive health care and cyclical technology spaces delivered some of the best responses to earnings last quarter . Does this sector diversity indicate bullish omens in the months ahead? It’s certainly a good sign, but what are the opportunities in these high-performing sectors?
Akamai Technologies, Inc. (NASDAQ:AKAM) is pushing new 52-week highs. In its most recent quarter, the company reported revenues of $378 million, a 14% year-over-year increase with a 25% gain in net income . Better still, its fast-growing security solutions division generated nearly half of its total revenues: During Q4, the segment saw five times growth on the prior year quarter, and subsequent first and second quarters delivered growth of 17% and 19%, respectively, in year-on-year comparisons, primarily driven by up-sales to existing clients. The company has been hiring sales staff to attract new customers, but admitted that it would take four or five quarters to get the full benefits of these hires.
In light of this, a repeat of the 7% sequential rise in security revenue from the current quarter for next quarter would add $12 million, which is the total revenue gain projected by analysts for next quarter, excluding any gain coming from its content acceleration or services divisions. There is a good chance it could deliver another beat next quarter.
Behemoth Merck & Co., Inc. (NYSE:MRK) may be the sleeper pick of the sector — if such a large stock could be considered a “sleeper.”
Last year, the company lost its patent on Singulair, its second-biggest-selling drug in its pipeline after Januvia . In the most recent quarter, Singulair saw a 80% drop in sales compared to last year, which amounted to a $1 billion loss . Despite this, overall pharmaceutical sales were down just 12% for the quarter
The more modest loss in gross pharmaceutical sales was assisted by double-digit, year-on-year quarterly growth in Merck & Co., Inc. (NYSE:MRK)’s second-tier product line: Janumet, Gardasil, NuvaRing, Nasonex, and Simponi . Collectively, these drugs delivered $1.47 billion quarterly sales.
Singulair sales, while a far cry from their peak, can still generate some revenue for Merck & Co., Inc. (NYSE:MRK); Zocor and Fosamax once delivered peak annual sales of $4.4 billion and $3 billion, respectively , but these two drugs still together deliver more than $1 billion in sales despite patents expiring over five years ago.