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Vertex (VRTX) to Report Q2 Earnings: Is a Surprise in Store?
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Biotech company Vertex Pharmaceuticals (VRTX - Free Report) will be reporting second quarter 2016 results on Jul 27, after the market closes.
Vertex’s track record is mixed with the company delivering positive surprises in two of the last four quarters and missing expectations in the remaining two quarters. The average earnings surprise over the last four quarters is -77.02%.
Let’s see how things are shaping up for this quarter.
Factors at Play
Vertex, known for its strong presence in the cystic fibrosis (CF) market, has two key CF products in its portfolio – Kalydeco and Orkambi.
Kalydeco revenues should continue growing reflecting continued increase in the number of patients initiating treatment with Kalydeco globally as well as a reduced impact from the VX-661 program.
Meanwhile, Orkambi revenues should grow sequentially in the second quarter. Vertex’s 2016 sales guidance for Orkambi assumes that 15% of patients on Orkambi discontinued treatment within the first three months of initiation. The company estimates that about 70% - 80% of patients will remain on treatment. Meanwhile, the overall compliance rate (reflects the number of pills actually taken by a patient in a given month), is expected to be 70% - 80%.
Operating expenses will also shoot up as Vertex develops its pipeline and works on expanding Kalydeco's and Orkambi’s labels and continues to invest in the Orkambi launch.
What Our Model Indicates
Our proven model does not conclusively show that Vertex is likely to beat estimates this quarter. That 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 earnings. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% since both the Most Accurate and the Zacks Consensus Estimate are a loss of 4 cents per share.
Zacks Rank: Vertex carries a Zacks Rank #3. Vertex’s Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
Amgen Inc. (AMGN - Free Report) has an Earnings ESP of +1.10% and carries a Zacks Rank #3. It will be reporting results on Jul 27.
BioMarin Pharmaceutical Inc. (BMRN - Free Report) has an Earnings ESP of +4.00% and carries a Zacks Rank #3. It will be reporting results on Aug 4.
The Earnings ESP for Intercept Pharmaceuticals, Inc. is +7.45% and it carries a Zacks Rank #3. The company is expected to release results on Aug 3.
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Vertex (VRTX) to Report Q2 Earnings: Is a Surprise in Store?
Biotech company Vertex Pharmaceuticals (VRTX - Free Report) will be reporting second quarter 2016 results on Jul 27, after the market closes.
Vertex’s track record is mixed with the company delivering positive surprises in two of the last four quarters and missing expectations in the remaining two quarters. The average earnings surprise over the last four quarters is -77.02%.
Let’s see how things are shaping up for this quarter.
Factors at Play
Vertex, known for its strong presence in the cystic fibrosis (CF) market, has two key CF products in its portfolio – Kalydeco and Orkambi.
Kalydeco revenues should continue growing reflecting continued increase in the number of patients initiating treatment with Kalydeco globally as well as a reduced impact from the VX-661 program.
Meanwhile, Orkambi revenues should grow sequentially in the second quarter. Vertex’s 2016 sales guidance for Orkambi assumes that 15% of patients on Orkambi discontinued treatment within the first three months of initiation. The company estimates that about 70% - 80% of patients will remain on treatment. Meanwhile, the overall compliance rate (reflects the number of pills actually taken by a patient in a given month), is expected to be 70% - 80%.
Operating expenses will also shoot up as Vertex develops its pipeline and works on expanding Kalydeco's and Orkambi’s labels and continues to invest in the Orkambi launch.
What Our Model Indicates
Our proven model does not conclusively show that Vertex is likely to beat estimates this quarter. That 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 earnings. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% since both the Most Accurate and the Zacks Consensus Estimate are a loss of 4 cents per share.
Zacks Rank: Vertex carries a Zacks Rank #3. Vertex’s Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
VERTEX PHARM Price and EPS Surprise
VERTEX PHARM Price and EPS Surprise | VERTEX PHARM Quote
Stocks That Warrant a Look
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
Amgen Inc. (AMGN - Free Report) has an Earnings ESP of +1.10% and carries a Zacks Rank #3. It will be reporting results on Jul 27.
BioMarin Pharmaceutical Inc. (BMRN - Free Report) has an Earnings ESP of +4.00% and carries a Zacks Rank #3. It will be reporting results on Aug 4.
The Earnings ESP for Intercept Pharmaceuticals, Inc. is +7.45% and it carries a Zacks Rank #3. The company is expected to release results on Aug 3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>