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Forest Laboratories, Inc. is scheduled to report its second quarter fiscal 2014 (ended Sep 30, 2013) earnings before the opening bell on Oct 22, 2013.

Last quarter, Forest Labs beat expectations with an earnings surprise of 300%. We expect the trend to continue in the second quarter.

Why a Likely Positive Surprise?

Our proven model shows that Forest Labs is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: The Earnings ESP (Expected Surprise Prediction), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +15.39%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #2 (Buy): Note that stocks with a Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings estimates. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision momentum.

The combination of Forest Labs’ Zacks Rank #2 and an ESP of +15.39% makes us confident of an earnings beat on Oct 22.

Factors at Play

Bystolic, a key growth driver at Forest Labs, should continue performing well in the second quarter of fiscal 2014. A low side-effect profile coupled with positive efficacy and tolerability data should drive Bystolic’s revenues. Apart from Bystolic, Namenda, which was underperforming lately, could see an improvement in its performance with the company working on transitioning users to the recently-launched XR formulation.

Meanwhile, Forest Labs has been very active in launching new products over the last few quarters. The company has launched a number of products including Teflaro (for the treatment of patients suffering from acute bacterial skin and skin structure infection and community acquired bacterial pneumonia), Daliresp (chronic obstructive pulmonary disease – COPD), Tudorza (COPD), Viibryd (major depressive disorder), and Linzess (constipation-predominant irritable bowel syndrome and chronic constipation. Better-than-expected performance of these new products will drive results.

We expect investor focus to remain on the new CEO’s long-term strategy for the company.

Other Stocks to Consider

Forest Labs is not the only company looking up this earnings season. We also see likely earnings beat coming from these companies:

Eli Lilly and Company (LLY - Analyst Report) has Earnings ESP of +1.92% and holds a Zacks Rank #3. Eli Lilly will be reporting third quarter earnings on Oct 23 before the market opens.

BioMarin Pharmaceutical, Inc. (BMRN - Analyst Report) has Earnings ESP of +3.57% and holds a Zacks Rank #3. BioMarin will be reporting third quarter earnings on Oct 24 after market close.

Shire (SHPG - Analyst Report) has Earnings ESP of +6.10% and holds a Zacks Rank #3. Shire will be reporting third quarter earnings on Oct 24 before the market opens.

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