Forget 2016! Why AstraZeneca plc & Royal Mail PLC Are Exceptional Long-Term Stock Picks

Today I am looking at two stocks with explosive long-term earnings potential!

Pills provider poised to charge

Growth hunters would have been well advised to steer well clear of pharmaceuticals giant AstraZeneca (LSE: AZN) in recent  years. A steady stream of patent losses across critical labels, such as its Nexium stomach treatment, has created prolonged havoc with the firm’s bottom line, and further profit pain is expected as generic competition continues to hit sales.

Indeed, AstraZeneca is expected to suffer a 2% earnings decline in 2015, marking the fourth successive bottom-line slip if realised. And an extra 6% slide is predicted for 2016.

Still, the London-listed firm’s efforts to inject life into its product pipeline and offset the loss of sales-driving labels is enjoying strong momentum. AstraZeneca received approval for its Tagrisso, Brilique and Lesinurad products from the European Medicines Agency during the past week, a promising omen in gaining European Union approval. And the business remains active on the M&A front, in a bid to give its development drive further fuel.

Although a P/E multiple of 16.5 times for next year is outside the watermark of 15 times that signals attractive value, I reckon AstraZeneca remains a bargain at these levels as its next generation of market-leading products are poised to hit the shelves.

And I believe the improving earnings picture should significantly bolster the Cambridge-based company’s dividends prospects, too. In the meantime, a maintenance of the 280-US-cent-per-share reward through to the end of next year — a dividend that has been frozen since 2011 — still yields a brilliant 4.2%.

Courier set to deliver stunning gains

Likewise, I believe that Britain’s oldest courier Royal Mail (LSE: RMG) should also safely hurdle expected turbulence in fiscal 2016 and post stellar earnings growth in the coming years.

The vast costs of restructuring are expected to push the bottom line 20% lower during the 12 months to March 2016. But as these expenses gradually reduce, and the growing popularity of e-commerce drives parcel traffic steadily higher, Royal Mail is expected to see earnings advance thereafter — indeed, a 10% advance is chalked in for fiscal 2017.

Not only does Royal Mail’s stranglehold on the UK packages and letters market give it terrific scope for growth, but the company’s pan-European logistics division (GLS) also continues to perform exceptionally well — revenues here galloped 8% between April and September thanks to growth in most of its territories.

And like AstraZeneca, I believe this scenario should significantly bolster dividends in the long term. The parcels play is anticipated to hike last year’s 21p per share reward to 21.7p in fiscal 2016, yielding a market-busting 4.6%. And Royal Mail’s solid growth prospects are anticipated to drive the dividend to 22.7p in 2017, yielding a delicious 4.9%.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.