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Vertex Pharmaceuticals (Nasdaq:(VRTX - Free Report) – Free Report) is the leading biotechnology company with a treatment for cystic fibrosis (CF).
The company holds a strong position in this market with two commercial products, Orkambi and Kalydeco. Early in August, Vertex had said that it expects its CF franchise to deliver revenues of $1.87 billion to $2.1 billion in 2017 including Orkambi revenues of $1.1 billion to $1.3 billion.
The CF market represents huge commercial potential. It is a rare, life-threatening disease estimated to affect about 75,000 people in North America, Europe and Australia. Vertex enjoys a strong position in this market being the first company to successfully develop a drug, Kalydeco, that treats the underlying cause of CF.
Vertex is working on expanding its CF portfolio and is currently seeking both FDA and EMA approval for new combination treatments of its so-called "correctors." With the FDA granting priority review, a response should be out by Feb 28, 2018.
What is CF?
Cystic fibrosis is an inherited disorder that causes severe damage to the lungs, digestive system and other organs in the body. According to the Mayo Clinic...
Cystic fibrosis affects the cells that produce mucus, sweat and digestive juices. These secreted fluids are normally thin and slippery. But in people with cystic fibrosis, a defective gene causes the secretions to become sticky and thick. Instead of acting as a lubricant, the secretions plug up tubes, ducts and passageways, especially in the lungs and pancreas.
Although cystic fibrosis requires daily care, people with the condition are usually able to attend school and work, and often have a better quality of life than people with cystic fibrosis had in previous decades. Improvements in screening and treatments mean people with cystic fibrosis now may live into their mid- to late 30s, on average, and some are living into their 40s and 50s.
Why Did VRTX Jump 20% in July?
On the morning of July 19, VRTX shares popped nearly $30 from $130 to $160. My colleague Brian Hamilton wrote about this in his Bull of the Day shortly after...
On Tuesday July 18, management announced that three of their four next-generation correctors in development to treat cystic fibrosis (CF) patients had positive Phase 1, and Phase 2 data.
Highlighting the report was the efficacy and safety shown by three different triple combination regimens. The data showed consistency across many regimen and patient populations, and is viewed as a game changer for the disease.
Given this positive data, it is expected that the company will be granted Breakthrough Therapy Designation (BTD) for their triplet regimens, cutting the 12 month timeline to 6 months. It is estimated that the 24-week Phase three trials will begin in the first half of 2018, and commercial treatments potentially be launched in the late part of 2019.
This breakthrough therapy is expected to deliver increased sales and earnings growth over the next 5 years for Vertex if and when it eventually gets full approval. Further, it is estimated that these triplet regimens will penetrate almost 90% of the $9 billion CF market.
USG Corporation (NYSE:(USG - Free Report) – Free Report) is the $4.6 billion maker of construction wallboard with its iconic, ubiquitous brand Sheetrock, which just celebrated its 100th birthday earlier this year.
But the stock has struggled this year on the back of declining earnings estimates and it's back in the cellar of the Zacks Rank.
And this follows a strong 2016 which saw the company revenues "trough" and bounce back while USG shares more than doubled from $16 to $34 between January 2016 and February 2017.
The recovery in sales was not matched by one in earnings though. Below is the Zacks proprietary Price & Consensus chart which plots changes in annual EPS estimates against the stock price...
As you can see, annual EPS estimates for both 2017 (blue line) and 2018 (gold line) have been on the decline all of this year.
This pessimism about future growth took USG shares back down to $26, but they've since seen a run back up to near the recent 52-week highs.
And right now, consensus sales estimates for 2017 have fallen back too. The current top line haul for this year is expected to be just $3.14 billion vs last year's $3.47 billion, for a 9.6% drop.
So while the economy is strong and real estate seems to be in high gear, this doesn't seem like a good time to be starting or adding to USG positions at 20X earnings.
Investors should at least wait until the estimates stop going down and start heading back up.
Additional content:
Why Did J. Jill Plunge 50% Thursday?
On Thursday, shares of women’s apparel retailer J. Jill Inc. (NYSE:(JILL - Free Report) – Free Report) are plunging today, down over 50% to $4.86 per share in morning trading on the heels of the company’s recent updates to its third quarter fiscal 2017 guidance.
J. Jill now expects total company comparable sales in the range of -3% to -5%, and a moderate decline in gross margin when compared to last year. The retailer also anticipated GAAP diluted EPS of 7 cents to 9 cents and adjusted diluted EPS between 8 cents to 10 cents for Q3.
“We have experienced a lower than expected sales trend across both our retail and direct channels, and are updating our guidance for the quarter. We have been assessing the change in trend and have identified product and marketing calendar issues that are affecting traffic and conversion, and we are reacting quickly,” said President and CEO Paula Bennett.
“Given our long track record of consistent sales and earnings growth driven by a strong connection with our customers, we are very disappointed with our soft sales trend. I am confident in the actions we are taking to regain momentum and once again delight our customer with the product and service experience she expects from us,” she continued.
The company said that it would provide investors and analysts a revised outlook for its full-year fiscal 2017 when its reports third quarter results on December 5.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Vertex Pharmaceuticals, USG and J. Jill highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 13, 2017 – Zacks Equity Research Vertex Pharmaceuticals (Nasdaq:(VRTX - Free Report) – Free Report) as the Bull of the Day, USG Corporation (NYSE:(USG - Free Report) – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on J. Jill Inc. (NYSE:(JILL - Free Report) – Free Report).
Here is a synopsis of all three stocks:
Bull of the Day:
Vertex Pharmaceuticals (Nasdaq:(VRTX - Free Report) – Free Report) is the leading biotechnology company with a treatment for cystic fibrosis (CF).
The company holds a strong position in this market with two commercial products, Orkambi and Kalydeco. Early in August, Vertex had said that it expects its CF franchise to deliver revenues of $1.87 billion to $2.1 billion in 2017 including Orkambi revenues of $1.1 billion to $1.3 billion.
The CF market represents huge commercial potential. It is a rare, life-threatening disease estimated to affect about 75,000 people in North America, Europe and Australia. Vertex enjoys a strong position in this market being the first company to successfully develop a drug, Kalydeco, that treats the underlying cause of CF.
Vertex is working on expanding its CF portfolio and is currently seeking both FDA and EMA approval for new combination treatments of its so-called "correctors." With the FDA granting priority review, a response should be out by Feb 28, 2018.
What is CF?
Cystic fibrosis is an inherited disorder that causes severe damage to the lungs, digestive system and other organs in the body. According to the Mayo Clinic...
Cystic fibrosis affects the cells that produce mucus, sweat and digestive juices. These secreted fluids are normally thin and slippery. But in people with cystic fibrosis, a defective gene causes the secretions to become sticky and thick. Instead of acting as a lubricant, the secretions plug up tubes, ducts and passageways, especially in the lungs and pancreas.
Although cystic fibrosis requires daily care, people with the condition are usually able to attend school and work, and often have a better quality of life than people with cystic fibrosis had in previous decades. Improvements in screening and treatments mean people with cystic fibrosis now may live into their mid- to late 30s, on average, and some are living into their 40s and 50s.
Why Did VRTX Jump 20% in July?
On the morning of July 19, VRTX shares popped nearly $30 from $130 to $160. My colleague Brian Hamilton wrote about this in his Bull of the Day shortly after...
On Tuesday July 18, management announced that three of their four next-generation correctors in development to treat cystic fibrosis (CF) patients had positive Phase 1, and Phase 2 data.
Highlighting the report was the efficacy and safety shown by three different triple combination regimens. The data showed consistency across many regimen and patient populations, and is viewed as a game changer for the disease.
Given this positive data, it is expected that the company will be granted Breakthrough Therapy Designation (BTD) for their triplet regimens, cutting the 12 month timeline to 6 months. It is estimated that the 24-week Phase three trials will begin in the first half of 2018, and commercial treatments potentially be launched in the late part of 2019.
This breakthrough therapy is expected to deliver increased sales and earnings growth over the next 5 years for Vertex if and when it eventually gets full approval. Further, it is estimated that these triplet regimens will penetrate almost 90% of the $9 billion CF market.
Bear of the Day:
USG Corporation (NYSE:(USG - Free Report) – Free Report) is the $4.6 billion maker of construction wallboard with its iconic, ubiquitous brand Sheetrock, which just celebrated its 100th birthday earlier this year.
But the stock has struggled this year on the back of declining earnings estimates and it's back in the cellar of the Zacks Rank.
And this follows a strong 2016 which saw the company revenues "trough" and bounce back while USG shares more than doubled from $16 to $34 between January 2016 and February 2017.
The recovery in sales was not matched by one in earnings though. Below is the Zacks proprietary Price & Consensus chart which plots changes in annual EPS estimates against the stock price...
As you can see, annual EPS estimates for both 2017 (blue line) and 2018 (gold line) have been on the decline all of this year.
This pessimism about future growth took USG shares back down to $26, but they've since seen a run back up to near the recent 52-week highs.
And right now, consensus sales estimates for 2017 have fallen back too. The current top line haul for this year is expected to be just $3.14 billion vs last year's $3.47 billion, for a 9.6% drop.
So while the economy is strong and real estate seems to be in high gear, this doesn't seem like a good time to be starting or adding to USG positions at 20X earnings.
Investors should at least wait until the estimates stop going down and start heading back up.
Additional content:
Why Did J. Jill Plunge 50% Thursday?
On Thursday, shares of women’s apparel retailer J. Jill Inc. (NYSE:(JILL - Free Report) – Free Report) are plunging today, down over 50% to $4.86 per share in morning trading on the heels of the company’s recent updates to its third quarter fiscal 2017 guidance.
J. Jill now expects total company comparable sales in the range of -3% to -5%, and a moderate decline in gross margin when compared to last year. The retailer also anticipated GAAP diluted EPS of 7 cents to 9 cents and adjusted diluted EPS between 8 cents to 10 cents for Q3.
“We have experienced a lower than expected sales trend across both our retail and direct channels, and are updating our guidance for the quarter. We have been assessing the change in trend and have identified product and marketing calendar issues that are affecting traffic and conversion, and we are reacting quickly,” said President and CEO Paula Bennett.
“Given our long track record of consistent sales and earnings growth driven by a strong connection with our customers, we are very disappointed with our soft sales trend. I am confident in the actions we are taking to regain momentum and once again delight our customer with the product and service experience she expects from us,” she continued.
The company said that it would provide investors and analysts a revised outlook for its full-year fiscal 2017 when its reports third quarter results on December 5.
Get today’s Zacks #1 Stock of the Day with your free subscription to Profit from the Pros newsletter:
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.