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Mallinckrodt (MNK) Earnings This Quarter: Stock to Disappoint?
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Mallinckrodt plc is set to report results for the quarter ended Dec. 30, 2016 on Feb 7.
We note that this quarter is a transition quarter for the company. In May 2016, Mallinckrodt announced that its board of directors has approved a change in the company's fiscal year end to the last Friday in December from the last Friday in September. This decision will result in a transition period from Oct 1 to Dec 30, 2016. The change in fiscal year will become effective for the company’s 2017 fiscal year, which will commence on Dec 31, 2016 and end on Dec 29, 2017.
The company’s track record has been impressive so far. Mallinckrodt has delivered a positive average earnings surprise of 11.2% in the last four trailing quarters. Let’s see how things are shaping up for this announcement.
Mallinckrodt’s share price declined 27.2% in the past one year, compared with the Zacks classified Medical-Generics Drugs industry’s fall of 30.5%.
Factors Impacting This Quarter
Mallinckrodt’s Specialty Generics segment continues to be a laggard. The weakness is expected to persist as stiff competition continues to hurt both volumes and prices. The company expects double-digit declines in revenues from this segment to impact gross margins.
Mallinckrodt is currently focused on reshaping its product portfolio through strategic acquisitions and non-core asset divestitures. The company sold its Nuclear Imaging business due to lingering challenging conditions for quite some time.
Revenues from Therakos are projected to decline due to production issues with the company’s third-party manufacturer for kits supporting the older XTS product.
Mallinckrodt’s acquire-to-invest policy is apparently paying off as both Inomax and Therakos continue to witness solid demand. Growth rates of Inomax are expected to be higher than the past rates for the next several quarters with a return to more traditional mid single-digits growth rates in the long run. Ofirmev too is projected to grow strongly driven by increased volume.
Acthar is also expected to grow in rheumatology, pulmonology and nephrology indications. The launch of the drug in the ophthalmology space is also expected to pick up.
The acquisition of hemostasis drugs – Recothrom Thrombin topical (recombinant), PreveLeak and Raplixa (fibrin sealant) from The Medicines Company has strengthened its growing hospital portfolio. The company has launched Preveleak and Raplixa and expects a slow but steady uptake.
Earnings Whispers
Our proven model does not conclusively show that Mallinckrodt will beat earnings 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 estimates. Unfortunately, that is not the case here, as you will see below.
Zacks ESP: The Earnings Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at -1.09%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Mallinckrodt carries a Zacks Rank #5 (Strong Sell). As it is, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Here are some other health care stocks that you may want to consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter.
Incyte Corporation (INCY - Free Report) has an Earnings ESP of +85.7% and a Zacks Rank #3. The company is scheduled to release results on Feb 14.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Mallinckrodt (MNK) Earnings This Quarter: Stock to Disappoint?
Mallinckrodt plc is set to report results for the quarter ended Dec. 30, 2016 on Feb 7.
We note that this quarter is a transition quarter for the company. In May 2016, Mallinckrodt announced that its board of directors has approved a change in the company's fiscal year end to the last Friday in December from the last Friday in September. This decision will result in a transition period from Oct 1 to Dec 30, 2016. The change in fiscal year will become effective for the company’s 2017 fiscal year, which will commence on Dec 31, 2016 and end on Dec 29, 2017.
The company’s track record has been impressive so far. Mallinckrodt has delivered a positive average earnings surprise of 11.2% in the last four trailing quarters. Let’s see how things are shaping up for this announcement.
Mallinckrodt’s share price declined 27.2% in the past one year, compared with the Zacks classified Medical-Generics Drugs industry’s fall of 30.5%.
Factors Impacting This Quarter
Mallinckrodt’s Specialty Generics segment continues to be a laggard. The weakness is expected to persist as stiff competition continues to hurt both volumes and prices. The company expects double-digit declines in revenues from this segment to impact gross margins.
Mallinckrodt is currently focused on reshaping its product portfolio through strategic acquisitions and non-core asset divestitures. The company sold its Nuclear Imaging business due to lingering challenging conditions for quite some time.
Revenues from Therakos are projected to decline due to production issues with the company’s third-party manufacturer for kits supporting the older XTS product.
Mallinckrodt’s acquire-to-invest policy is apparently paying off as both Inomax and Therakos continue to witness solid demand. Growth rates of Inomax are expected to be higher than the past rates for the next several quarters with a return to more traditional mid single-digits growth rates in the long run. Ofirmev too is projected to grow strongly driven by increased volume.
Acthar is also expected to grow in rheumatology, pulmonology and nephrology indications. The launch of the drug in the ophthalmology space is also expected to pick up.
The acquisition of hemostasis drugs – Recothrom Thrombin topical (recombinant), PreveLeak and Raplixa (fibrin sealant) from The Medicines Company has strengthened its growing hospital portfolio. The company has launched Preveleak and Raplixa and expects a slow but steady uptake.
Earnings Whispers
Our proven model does not conclusively show that Mallinckrodt will beat earnings 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 estimates. Unfortunately, that is not the case here, as you will see below.
Zacks ESP: The Earnings Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at -1.09%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Mallinckrodt carries a Zacks Rank #5 (Strong Sell). As it is, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Mallinckrodt PLC Price and Consensus
Mallinckrodt PLC Price and Consensus | Mallinckrodt PLC Quote
Stocks to Consider
Here are some other health care stocks that you may want to consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter.
Amgen Inc. (AMGN - Free Report) has an Earnings ESP of +1.08% and a Zacks Rank #3. The company is scheduled to release results on Feb 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Incyte Corporation (INCY - Free Report) has an Earnings ESP of +85.7% and a Zacks Rank #3. The company is scheduled to release results on Feb 14.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>