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Pfizer Inc. (PFE - Analyst Report) is set to report third quarter 2013 results on Oct 29, before the opening bell. Last quarter it posted a positive earnings surprise of 3.70%. Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

This biopharmaceutical company has delivered positive earnings surprises in three of the last four quarters with an average beat of 2.66%.

However, in the third quarter, genericization will continue to hit revenues which will eventually affect the company’s top line. The loss of exclusivity of Lipitor and Revatio/Viagra among others in major markets will weigh heavily on the company’s revenue figure. To mitigate the impact of genericization the company is looking to contain costs and develop its pipeline. Focus in the third quarter will be on the performance of newly launched drugs.

Pfizer’s Emerging Markets revenues remained flat last quarter. At the time of releasing second quarter results, Pfizer had stated that it expects the second half of the year to be stronger for its emerging markets business, especially in China. Consequently, focus will also be on the performance of the emerging markets’ drugs in the third quarter of 2013.  Moreover, we expect the company to throw further light on its pipeline development efforts, while releasing the third quarter results.

Earnings Whispers?

We are not confident about an earnings beat this quarter going by our proven model. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat Zacks Consensus Estimate.

Zacks ESP: The ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at 56 cents.

Zacks Rank #3: Pfizer’s Zacks Rank #3, however, increases the predictive power of ESP. That said we also need to have a positive ESP to be confident of an earnings surprise call.

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 revisions momentum.

Stocks to Consider

Here are some stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:

InterMune Inc. (ITMN - Snapshot Report), with Earnings ESP of +2.82% and a Zacks Rank #2.

Endo Health Solutions Inc. (ENDP - Analyst Report), with Earnings ESP of +0.89% and a Zacks Rank #3.

Mylan, Inc. (MYL - Analyst Report), with Earnings ESP of +1.28% and a Zacks Rank #3.

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