Why AbbVie and Johnson & Johnson Could Outperform Pfizer

Key Points

• Pfizer has rebounded on news of its participation with the TrumpRx platform, but questions remain about margins and the impact of its new pricing agreements.
• AbbVie offers stronger earnings growth potential, a deep late-stage pipeline, and smart onshoring moves to support future demand.
• Johnson & Johnson is emerging from legal headwinds with a leaner business model, attractive valuation, and a long dividend growth streak.

Pfizer Inc. NYSE: PFE made a strong move higher after it became the first drug manufacturer to sign on as part of the TrumpRx platform. PFE stock is up nearly 14% since its closing price of around $23.61 on Sept. 25.

This is welcome news to long-term holders who have endured a significant dip in the stock since its vaccine-fueled surge in 2021. PFE stock trades at an attractive multiple of around 9x forward earnings and is a steady dividend payer with a dividend yielding 6.4%.

However, as with many things, the details matter. Investors should look for answers to several questions. The primary one among them is which drugs will be included. Pfizer will likely exempt its premium drugs from the program, and with good reason. The program's mechanics may lead to the company increasing the volume it sells, but at prices that will impact margins.

In the meantime, the bull case for Pfizer centers around its pipeline of over 100 drug candidates. Many of these are positioning Pfizer in the area of customizable medicine. That may be a better reason to own PFE stock for the long haul. Nevertheless, two other medical stocks might be more suitable options.

AbbVie’s Onshoring Strategy Aligns With U.S. Policy Goals

As of this writing, AbbVie Inc. NYSE: ABBV is not part of the TrumpRx platform. That doesn’t mean it’s not taking steps to mitigate the potential impact of tariffs. The company has announced plans to onshore some of its manufacturing capacity in the United States. This is a linchpin of the Trump administration’s desire to rein in U.S. supply chains for critical industries.

In late September, the drug giant announced it would launch its recently approved ovarian cancer drug, Elahere, in the United Kingdom at a list price matching the U.S. price. That’s in line with the Trump administration’s demands for drug makers to offer the U.S. “most-favored-nation" pricing.

Even before that announcement, at least two analysts had set a price target of $251 on ABBV stock, which is a gain of nearly 10% from its price on Oct. 6. However, analysts are forecasting over 13% earnings growth in the next 12 months, which may mean price targets are too low.

In the last five years, ABBV stock has delivered a total return of over 225%, supported by steady earnings growth and a dividend yield of 2.87%. This performance underscores the strength of AbbVie’s core drugs and its ability to balance income generation with innovation. The company also maintains a deep pipeline, with more than 50 drug candidates in late-stage clinical trials.

Johnson & Johnson’s Streamlined Focus Strengthens Its Pharma Edge

Johnson & Johnson NYSE: JNJ offers investors a different way to play the pharmaceutical sector. Johnson & Johnson sold off its consumer products division in 2023. The remaining streamlined company has three divisions, one of which is its pharmaceutical division, which develops drugs in a range of areas, including immunology, oncology, neuroscience, and infectious diseases.

In the last five years, JNJ stock has delivered a total return of over 46%. But to be fair, much of that gain has occurred in the last 12 months. Johnson & Johnson is just now getting past its long-running lawsuit focused on its talc powder and links to ovarian cancer. That kept many investors away, but does the stock’s recent performance suggest the catch-up trade is over?

That wouldn’t seem to be true from a valuation perspective. At 17x earnings, JNJ stock trades at a discount to its historical average. Analysts have been raising their price targets ahead of the company’s Oct. 14 earnings report, suggesting renewed confidence in its outlook. With a dividend yield of 2.76% and a 64-year track record of consecutive increases, JNJ offers investors a blend of value, reliability, and steady income.