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Perrigo Company plc (PRGO - Analyst Report) is set to report second quarter fiscal year 2014 results on Feb 6 before the market opens. The company’s fiscal year ends on the last Saturday of June every year

Last quarter, the company had delivered an earnings surprise of +8.57%. We expect the company to beat expectations in the second quarter as well.

Why a Likely Positive Surprise?

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

Positive Zacks ESP: The PRGO - Analyst Report)%20Poised%20to%20Beat%20Earnings%20Estimates?">Earnings ESP (Expected Surprise Prediction), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.25%. This is a very meaningful and leading indicator of a likely positive earnings surprise.

Zacks #3 Rank (Hold): Stocks with 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 Perrigo’s Zacks Rank #3 and an earnings ESP of +1.25% makes us confident of an earnings beat on Feb 6.

What's Driving the Better-than-Expected Earnings?

Perrigo has delivered positive earnings surprises in three of the last four quarters with an average beat of 2.91%.

We note that this will be the first earnings report for the Dublin, Ireland-based Perrigo Company plc, formed following the Dec 2013 merger of Allegan, Mich. based Perrigo Company and Elan Corporation. Following the acquisition of Elan, Perrigo’s revenue stream has been boosted as it is now eligible to receive significant royalties on multiple sclerosis drug Tysabri from Biogen Idec (BIIB - Analyst Report).

The generic (Rx Pharmaceuticals) segment of Perrigo is expected to continue performing well in the second quarter of fiscal year 2014. Newly launched products have also boosted revenues at Perrigo over the last few quarters and are expected to do so again. The company intends to launch more than 75 new products in fiscal 2014 contributing approximately $190 million to fiscal 2014 revenues.

Other Stocks to Consider

Perrigo is not the only firm looking up this earnings season. Other stocks in the same sector that have both a positive earnings ESP and a favorable Zacks Rank are:

NuVasive Inc. (NUVA - Snapshot Report) has an Earnings ESP of +11.11% and holds a Zacks Rank #1 (Strong Buy). NuVasive will be reporting fourth quarter earnings on Mar 3.

Hospira Inc. (HSP - Analyst Report) has earnings ESP of +2.00% and holds a Zacks Rank #3. Hospira will report fourth quarter earnings on Feb 12.

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