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Can Allergan (AGN) Keep the Earnings Streak Alive in Q1?
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We expect Allergan plc to beat expectations when it reports first-quarter 2018 results on Apr 30, before market open. Last quarter, the company delivered a positive earnings surprise of 2.78%.
Allergan’s share price has declined 2.3% this year so far, compared with the industry’s decline of 5.8%.
Allergan’s earnings performance has been strong, with the company beating expectations in each of the past four quarters. The average positive earnings surprise over the last four quarters is 1.81%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
On the fourth-quarter 2017 conference call, the company guided first-quarter 2018 revenues between $3.5 billion and $3.6 billion while earnings per share are expected to be between $3.20 and $3.40. These numbers indicate the lowest revenue and earnings quarter for the year.
In the fourth quarter of 2017, the favorable timing of physician rebating program benefited sales of Allergan’s facial aesthetics products. This benefit was absent in the first quarter of 2018, which will hurt revenues. As such, the company expects first-quarter revenue growth rate to be somewhat lower than the annual 2018 growth rate. Also, generic competition for Estrace and Namenda XR will hurt sales sharply in the first quarter.
While a generic version of Namenda XR was launched by Indian company, Lupin in February that of Estrace cream was launched by Mylan in January.
Allergan expects a generic version of Restasis, its second best-selling drug, to be launched between April and July of 2018. Meanwhile, a generic version of Delzicol is expected to be launched in early second-quarter 2018.
Investor focus on the call will be on management’s comments on the potential impact of generic competition on key growth drivers, Restasis and Namenda XR. The Zacks Consensus Estimate for Restasis is $295 million.
Nonetheless, Allergan’s established products like Botox, Linzess, Lo Loestrin and Juvéderm collection of fillers and new products like Juvéderm collection of fillers should support sales in Q1. The Zacks Consensus Estimate for Botox is $771 million.
In fact, recent label expansions for Botox (FDA approval for forehead line treatment) and Vraylar (FDA approval for maintenance treatment of schizophrenia) and Avycaz (FDA approval for HABP/VABP) should add to sales of these drugs in Q1. Meanwhile, the addition of Alloderm from LifeCell (January 2017) and CoolSculpting body contouring system from Zeltiq (April 2017) acquisitions should continue to support the top line in the quarter.
However, we believe sales erosion of Aczone due to generic pressure on the branded acne category and loss of exclusivity (LOE), mainly from Asacol HD and Minastrin 24, will continue to hurt the top line.
We remind investors that on the Q4 call, the company had said that it does not expect any significant M&A activities in 2018. Allergan expects to reevaluate its M&A strategy in the second half of the year once it gets through the LOEs. An update is expected at the upcoming conference call.
Earnings Whispers
Our proven model shows that Allergan is likely to beat on earnings because it has the right combination of two key ingredients. 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.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate ($3.37 per share) and the Zacks Consensus Estimate ($3.36 per share) is +0.14%. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Allergan has a Zacks Rank #3. The combination of Allergan’s Zacks Rank #3 and positive ESP makes us confident of an earnings beat in the upcoming release.
Sell-rated stocks (Zacks Rank #4 or 5), on the other hand, should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some large-cap health care stocks worth considering per our model. These also have the right combination of elements to beat on earnings this time around:
Pfizer, Inc. (PFE - Free Report) is also slated to announce financial figures on May 1. The company has an Earnings ESP of +1.36% and is also a Zacks #2 Ranked stock.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Can Allergan (AGN) Keep the Earnings Streak Alive in Q1?
We expect Allergan plc to beat expectations when it reports first-quarter 2018 results on Apr 30, before market open. Last quarter, the company delivered a positive earnings surprise of 2.78%.
Allergan’s share price has declined 2.3% this year so far, compared with the industry’s decline of 5.8%.
Allergan’s earnings performance has been strong, with the company beating expectations in each of the past four quarters. The average positive earnings surprise over the last four quarters is 1.81%.
Allergan plc Price and EPS Surprise
Allergan plc Price and EPS Surprise | Allergan plc Quote
Let’s see how things are shaping up for this announcement.
Factors to Consider
On the fourth-quarter 2017 conference call, the company guided first-quarter 2018 revenues between $3.5 billion and $3.6 billion while earnings per share are expected to be between $3.20 and $3.40. These numbers indicate the lowest revenue and earnings quarter for the year.
In the fourth quarter of 2017, the favorable timing of physician rebating program benefited sales of Allergan’s facial aesthetics products. This benefit was absent in the first quarter of 2018, which will hurt revenues. As such, the company expects first-quarter revenue growth rate to be somewhat lower than the annual 2018 growth rate. Also, generic competition for Estrace and Namenda XR will hurt sales sharply in the first quarter.
While a generic version of Namenda XR was launched by Indian company, Lupin in February that of Estrace cream was launched by Mylan in January.
Allergan expects a generic version of Restasis, its second best-selling drug, to be launched between April and July of 2018. Meanwhile, a generic version of Delzicol is expected to be launched in early second-quarter 2018.
Investor focus on the call will be on management’s comments on the potential impact of generic competition on key growth drivers, Restasis and Namenda XR. The Zacks Consensus Estimate for Restasis is $295 million.
Nonetheless, Allergan’s established products like Botox, Linzess, Lo Loestrin and Juvéderm collection of fillers and new products like Juvéderm collection of fillers should support sales in Q1. The Zacks Consensus Estimate for Botox is $771 million.
In fact, recent label expansions for Botox (FDA approval for forehead line treatment) and Vraylar (FDA approval for maintenance treatment of schizophrenia) and Avycaz (FDA approval for HABP/VABP) should add to sales of these drugs in Q1. Meanwhile, the addition of Alloderm from LifeCell (January 2017) and CoolSculpting body contouring system from Zeltiq (April 2017) acquisitions should continue to support the top line in the quarter.
However, we believe sales erosion of Aczone due to generic pressure on the branded acne category and loss of exclusivity (LOE), mainly from Asacol HD and Minastrin 24, will continue to hurt the top line.
We remind investors that on the Q4 call, the company had said that it does not expect any significant M&A activities in 2018. Allergan expects to reevaluate its M&A strategy in the second half of the year once it gets through the LOEs. An update is expected at the upcoming conference call.
Earnings Whispers
Our proven model shows that Allergan is likely to beat on earnings because it has the right combination of two key ingredients. 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.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate ($3.37 per share) and the Zacks Consensus Estimate ($3.36 per share) is +0.14%. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Allergan has a Zacks Rank #3. The combination of Allergan’s Zacks Rank #3 and positive ESP makes us confident of an earnings beat in the upcoming release.
Sell-rated stocks (Zacks Rank #4 or 5), on the other hand, should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some large-cap health care stocks worth considering per our model. These also have the right combination of elements to beat on earnings this time around:
Bristol-Myers Squibb Company (BMY - Free Report) has an Earnings ESP of +0.82% and a Zacks Rank of 2. The company is scheduled to report first-quarter earnings on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
Pfizer, Inc. (PFE - Free Report) is also slated to announce financial figures on May 1. The company has an Earnings ESP of +1.36% and is also a Zacks #2 Ranked stock.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>