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Actavis plc (ACT - Analyst Report) is scheduled to report first quarter 2014 results before the opening bell on Apr 30.

Last quarter, Actavis had posted an earnings surprise of +3.59%. We expect the company to beat expectations in the first quarter as well.

Why a Likely Positive Surprise?

Our proven model shows that Actavis 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 +3.34%. This is a very meaningful and leading indicator of a likely positive earnings surprise.

Zacks #2 Rank (Buy): Note that 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 Actavis’ Zacks Rank #2 (Buy) and an earnings ESP of +3.34% make us confident of an earnings beat on Apr 30.

What is Driving Better-than-Expected Earnings?

Although Actavis’ generic version of Concerta will continue to face competition from new entrants in the attention deficit hyperactivity disorder (ADHD) market, generic versions of Lidoderm, Cymbalta and Suboxone should perform well. Strong performance by branded products like Rapaflo and Generess Fe should boost revenues. The top-line should benefit from the Warner Chilcott acquisition.

Apart from working on driving generic product sales, Actavis is focusing on strengthening its branded product portfolio. In Feb 2014, Actavis announced its intention to acquire Forest Laboratories Inc. for a cash and equity transaction of about $25 billion. The deal is slated to close in mid-2014.

Other Stocks to Consider

Actavis is not the only company looking up this earnings season. We also see likely earnings beats coming from these companies in the medical sector:

Teva Pharmaceutical Industries Ltd. (TEVA - Analyst Report) has an Earnings ESP of +0.82% and holds a Zacks Rank #2. Teva will report first quarter earnings on May 1.

Vertex Pharmaceuticals Inc. (VRTX - Analyst Report) has an Earnings ESP of +5.63% and holds a Zacks Rank #2. Vertex Pharma will report first quarter earnings on May 1.

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