2021 has been a good year for many FTSE 100 stocks. But by the looks of it, it appears that 2022 might be better still. Recovery is underway, Covid-19 is largely under control, and the stock markets are rallying. And here is the best part: the FTSE 100 index, for all its progress, has yet to return to the highs of early 2020. This indicates to me that there is at least some steam in the stock markets still.
AstraZeneca is pricey but attractive
It does not sound very fashionable at this time to suggest a defensive stock as a great purchase for 2022. But this FTSE 100 stock is a stand-out for me irrespective of where we are in the business cycle.
I am talking about the Covid-19 vaccine producer AstraZeneca (LSE: AZN), which touched new highs recently. The stock is among the most pricey FTSE 100 stocks, but that doesn’t put me off. I have long liked the stock despite not just its high share price, but also its elevated price-to-earnings (P/E) ratio. Its P/E is 44 times right now.
Massive revenue increase for the FTSE 100 stock
And after its latest third-quarter results released earlier today, I reckon it could continue to do well. Its revenues grew by a huge 50% from the same quarter last year. And its core earnings per share (EPS) increased by 14%. Core earnings are those from ongoing operations as opposed to reported earnings that include the impact of one-off items, like the sale of assets. Its performance in the latest quarter brings its revenue growth for the first nine months of the year to 32% and its core EPS growth to a notable 22%.
AstraZeneca is also positive in its guidance for 2021. It expects that revenues will grow by a “low-twenties percentage”. If Covid-19 vaccine revenues are added to this in the next quarter, then the revenue growth is expected to jump to “mid-to-high twenties percentage”. It also expects further growth in core EPS.
Profits from the vaccine?
Moving forward, it is possible that its profits will be positively impacted as well. It has just said that it will start moving away from the provision of Covid-19 vaccines at cost. Sale at cost was part of its agreement with Oxford University, which was its partner in vaccine development.
Frankly, as an investor in the stock I would have much preferred to see it continue to provide these at cost considering some emerging countries in particular are witnessing low rates of vaccination even now. On the other hand, though, since a number of vaccine alternatives are available, I am not sure if AstraZeneca’s vaccine is as critical as it was a year ago. In any case, AstraZeneca’s pandemic agreements are still expected to constitute much of its vaccine sales next quarter.
In any case, AstraZeneca’s performance is expected to stay elevated for the foreseeable future. This could continue to push up its share price. I have bought the stock and could buy another 10-11 of its shares for around £1k for 2022 today.
Manika Premsingh owns shares of AstraZeneca. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.