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Gilead (GILD) Q1 Earnings: Stock Likely to Beat Estimates?
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Gilead Sciences Inc. (GILD - Free Report) is scheduled to report first-quarter 2017 results on May 2, after the market closes. Last quarter, the company beat expectations by 14.3%.
Gilead’s track record is mixed, with the company beating estimates in two of the last four trailing and missing in the other two. Overall, the company recorded an average positive earnings surprise of 2.88%.
Shares of Gilead lost 33.7% in the last one year, underperforming the Zacks classified Medical-Biomedical and Genetics industry’s decline of 12.0%.
Let's see how things are shaping up for this biotech major for this announcement.
Earnings Whispers
Our proven model shows that Gilead is likely to beat on earnings because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +2.77%. This is because the Most Accurate estimate is $2.23 while the Zacks Consensus Estimate is pegged lower at $2.17. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Gilead currently carries a Zacks Rank #3. The combination of Zacks Rank #3 and a positive ESP makes us confident of an earnings beat at Gilead in the upcoming release.
On the other hand, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Factors at Play
Concurrent with the fourth-quarter earnings call, Gilead provided guidance for annual guidance for 2017. Gilead expects net product sales in the range of $22.5–$24.5 billion. Non-HCV product sales are projected between $15 billion and $15.5 billion. HCV product sales are projected between $7.5 billion and $9.0 billion.
Adjusted R&D expenses and adjusted SG&A expenses are projected in the range of $3.1–$3.4 billion and $3.1–$3.4 billion, respectively. Adjusted product gross margin is estimated in the range of 86–88%.
2016 witnessed strong performance from HIV and other antiviral product sales driven by continued uptake of its tenofovir alafenamide (TAF) based products – Genvoya, Descovy and Odefsey. We expect the trend to continue in the first quarter as well. Genvoya has already become the most prescribed regimen for both treatment-naïve and switch patients since its launch.
By the end of 2016, the TAF-based regimens made up 37% of Gilead's HIV prescription volume in the treatment market. Strong uptake for Truvada for use in the pre-exposure prophylaxis setting should also boost sales. However, Gilead will lose exclusivity for Viread in 2017 in some countries outside the U.S. which should impact sales.
However, the HCV franchise continues to be under competitive and pricing pressure leading to a massive decline in Harvoni and Sovaldi sales in 2016. Harvoni and Sovaldi face competition from AbbVie’s (ABBV - Free Report) Viekira Pak and Viekira XR among others. Higher discounts and payer mix continue to impact sales adversely. Total HCV treatment starts in the U.S. were an estimated 231,000 in 2016, approximately 25,000 less than 2015. The company expects a further decline in patients starts in 2017.
On a positive note, the HCV portfolio was boosted when Epclusa gained approval in 2016 to become the first and only all-oral, pan-genotypic, STR consisting of Sovaldi and velpatasvir (an NS5A inhibitor), for the treatment of adults with genotype 1–6 chronic HCV infection. Initial uptake of Epclusa has been encouraging while formulary reviews are on track.
The recently approved HBV drug Vemlidy should also start contributing meaningfully to the top line.
On the first-quarter call, investors should keep an eye on Gilead’s performance while pipeline updates will also be keenly awaited. Focus would also be on the performance of Epclusa and TAF-based regimens.
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 +2.33% and a Zacks Rank #3. The company is scheduled to release results on Apr 26.
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Gilead (GILD) Q1 Earnings: Stock Likely to Beat Estimates?
Gilead Sciences Inc. (GILD - Free Report) is scheduled to report first-quarter 2017 results on May 2, after the market closes. Last quarter, the company beat expectations by 14.3%.
Gilead’s track record is mixed, with the company beating estimates in two of the last four trailing and missing in the other two. Overall, the company recorded an average positive earnings surprise of 2.88%.
Shares of Gilead lost 33.7% in the last one year, underperforming the Zacks classified Medical-Biomedical and Genetics industry’s decline of 12.0%.
Let's see how things are shaping up for this biotech major for this announcement.
Earnings Whispers
Our proven model shows that Gilead is likely to beat on earnings because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +2.77%. This is because the Most Accurate estimate is $2.23 while the Zacks Consensus Estimate is pegged lower at $2.17. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Gilead currently carries a Zacks Rank #3. The combination of Zacks Rank #3 and a positive ESP makes us confident of an earnings beat at Gilead in the upcoming release.
On the other hand, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Factors at Play
Concurrent with the fourth-quarter earnings call, Gilead provided guidance for annual guidance for 2017. Gilead expects net product sales in the range of $22.5–$24.5 billion. Non-HCV product sales are projected between $15 billion and $15.5 billion. HCV product sales are projected between $7.5 billion and $9.0 billion.
Adjusted R&D expenses and adjusted SG&A expenses are projected in the range of $3.1–$3.4 billion and $3.1–$3.4 billion, respectively. Adjusted product gross margin is estimated in the range of 86–88%.
2016 witnessed strong performance from HIV and other antiviral product sales driven by continued uptake of its tenofovir alafenamide (TAF) based products – Genvoya, Descovy and Odefsey. We expect the trend to continue in the first quarter as well. Genvoya has already become the most prescribed regimen for both treatment-naïve and switch patients since its launch.
By the end of 2016, the TAF-based regimens made up 37% of Gilead's HIV prescription volume in the treatment market. Strong uptake for Truvada for use in the pre-exposure prophylaxis setting should also boost sales. However, Gilead will lose exclusivity for Viread in 2017 in some countries outside the U.S. which should impact sales.
However, the HCV franchise continues to be under competitive and pricing pressure leading to a massive decline in Harvoni and Sovaldi sales in 2016. Harvoni and Sovaldi face competition from AbbVie’s (ABBV - Free Report) Viekira Pak and Viekira XR among others. Higher discounts and payer mix continue to impact sales adversely. Total HCV treatment starts in the U.S. were an estimated 231,000 in 2016, approximately 25,000 less than 2015. The company expects a further decline in patients starts in 2017.
On a positive note, the HCV portfolio was boosted when Epclusa gained approval in 2016 to become the first and only all-oral, pan-genotypic, STR consisting of Sovaldi and velpatasvir (an NS5A inhibitor), for the treatment of adults with genotype 1–6 chronic HCV infection. Initial uptake of Epclusa has been encouraging while formulary reviews are on track.
The recently approved HBV drug Vemlidy should also start contributing meaningfully to the top line.
On the first-quarter call, investors should keep an eye on Gilead’s performance while pipeline updates will also be keenly awaited. Focus would also be on the performance of Epclusa and TAF-based regimens.
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.
Intercept Pharmaceuticals, Inc. has an Earnings ESP of +9.13% and a Zacks Rank #3. The company is expected to release results on May 4. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amgen Inc. (AMGN - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #3. The company is scheduled to release results on Apr 26.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>