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Vertex (VRTX) Q3 Earnings: What's in Store for the Stock?
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Biotech company Vertex Pharmaceuticals (VRTX - Free Report) will be reporting third-quarter 2016 results on Oct 25, after the market closes.
Vertex’s track record is mixed with the company delivering positive surprises in three of the last four quarters and missing expectations in one. The average earnings surprise over the last four quarters is a negative 63.54%.
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’s revenues should continue growing reflecting the continued increase in the number of patients initiating treatment with Kalydeco globally, as well as a reduced impact from the VX-661 program.
However, Orkambi sales growth has been slower-than-expected. Last month, Vertex lowered its 2016 guidance for Orkambi’s sales to a range of $950–$990 million from the previous expectation of $1.0–$1.1 billion. The revision was primarily due to slower-than-anticipated launch of Orkambi in Germany and less-than-expected refills in the months of July and August. Sales of the drug are expected in the range of $230–$235 million in the third quarter.
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 -225.00% since the Most Accurate stands at a loss of 13 cents while the Zacks Consensus Estimate is at a loss of 4 cents.
Zacks Rank: Vertex carries a Zacks Rank #5 (Strong Sell).
As it is, 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.
Infinity Pharmaceuticals, Inc. is expected to report its results on Nov 3. It has an Earnings ESP of +5.81% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
ImmunoGen, Inc. has an Earnings ESP of +5.41% and carries a Zacks Rank #3. It is scheduled to report its results on Oct 28.
The Earnings ESP for Intercept Pharmaceuticals, Inc. is +5.26% and it sports a Zacks Rank #1. The company is expected to release results on Nov 1.
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Vertex (VRTX) Q3 Earnings: What's in Store for the Stock?
Biotech company Vertex Pharmaceuticals (VRTX - Free Report) will be reporting third-quarter 2016 results on Oct 25, after the market closes.
Vertex’s track record is mixed with the company delivering positive surprises in three of the last four quarters and missing expectations in one. The average earnings surprise over the last four quarters is a negative 63.54%.
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’s revenues should continue growing reflecting the continued increase in the number of patients initiating treatment with Kalydeco globally, as well as a reduced impact from the VX-661 program.
However, Orkambi sales growth has been slower-than-expected. Last month, Vertex lowered its 2016 guidance for Orkambi’s sales to a range of $950–$990 million from the previous expectation of $1.0–$1.1 billion. The revision was primarily due to slower-than-anticipated launch of Orkambi in Germany and less-than-expected refills in the months of July and August. Sales of the drug are expected in the range of $230–$235 million in the third quarter.
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 -225.00% since the Most Accurate stands at a loss of 13 cents while the Zacks Consensus Estimate is at a loss of 4 cents.
Zacks Rank: Vertex carries a Zacks Rank #5 (Strong Sell).
As it is, 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.
Infinity Pharmaceuticals, Inc. is expected to report its results on Nov 3. It has an Earnings ESP of +5.81% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
ImmunoGen, Inc. has an Earnings ESP of +5.41% and carries a Zacks Rank #3. It is scheduled to report its results on Oct 28.
The Earnings ESP for Intercept Pharmaceuticals, Inc. is +5.26% and it sports a Zacks Rank #1. The company is expected to release results on Nov 1.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>