Back to top

Image: Bigstock

Ligand (LGND) Q3 Earnings: Is the Stock Likely to Disappoint?

Read MoreHide Full Article

Ligand Pharmaceuticals Incorporated (LGND - Free Report) is scheduled to report third-quarter 2016 results on Nov 3, after the market closes. Ligand has an impressive track record, with its earnings surpassing expectations in three of the trailing four quarters, delivering an average positive surprise of 36.66%.

However, in the last reported quarter, Ligand posted a negative earnings surprise of 22.73%. Let’s see how things are shaping up for this announcement.

Factors at Play

Ligand generates revenues in the form of royalties, license and milestone payments, and from the sale of Captisol material. The company’s Captisol formulation technology has allowed it to enter into several licensing deals and generate royalties. While royalties depend on the sales of its two key partnered assets – Kyprolis and Promacta, Captisol material sales are contingent upon the timing of its purchase for clinical and commercial use.

Third-quarter royalties are expected to be driven by Promacta and Kyprolis sales, while recently launched Evomela should contribute meaningfully to the top line. The Jan 2016 OMT acquisition should also drive the company’s results. The acquisition has not only diversified Ligand's business by adding an antibody-generating platform, OmniAb, but has also created a strong platform for the company to seek new licenses and partnerships, and increased its potential to earn royalties.

The acquisition of the economic rights to the CorMatrix portfolio has been quite beneficial since its acquisition in May 2016, and will continue to contribute to results in the to-be-reported quarter.

Meanwhile, operating expenses vary on a quarterly basis depending mainly on the timing of costs associated with internal programs and business development activities.

On the third-quarter call, investor focus will remain on updates on the company’s partnerships and major pipeline assets.

Earnings Whispers

Our proven model does not conclusively show that Ligand is likely to beat earnings estimates this quarter. 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) for this to happen. Unfortunately, that is not the case here, as elaborated below.

Zacks ESP: The Earnings ESP for Ligand is 0.00% since the Most Accurate estimate of 9 cents is in line with the Zacks Consensus Estimate.

Zacks Rank: Ligand carries a Zacks Rank #4 (Sell). As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement.

Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.

LIGAND PHARMA-B Price and EPS Surprise

 

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider instead, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Shire plc is scheduled to report third-quarter results on Nov 1. It has an Earnings ESP of +1.25% and a Zacks Rank #2.

The Earnings ESP for Aerie Pharmaceuticals, Inc. is +8.57% and it carries a Zacks Rank #3. The company is slated to release third-quarter results on Nov 2.

ARIAD Pharmaceuticals Inc. is expected to report third-quarter results on Nov 1. It has an Earnings ESP of +5.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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>>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Ligand Pharmaceuticals Incorporated (LGND) - free report >>

Published in