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Allergan (AGN) to Report Q2 Earnings: What's in the Cards?
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Allergan plc will report second-quarter 2018 results on Jul 26, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 11.31%.
Allergan’s share price has risen 5% this year so far against the industry’s decline of 1.1%.
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 4.41%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
On the first-quarter conference call, management guided second-quarter revenues between $3.85 billion and $4.0 billion and earnings per share in the range of $4 to $4.20.
Lower sales of Namenda XR, Estrace cream, Minastrin and Asacol/Delzicol due to generic competition might hurt Allergan’s revenues in the second quarter.
While a generic version of Alzheimer’s treatment Namenda XR was launched by India based company, Lupin in February that of Estrace cream was launched by Mylan in January. A generic version of Delzicol is also expected to be launched soon. Allergan expected a generic version of Restasis, its second best-selling drug, to be launched between April and July of 2018. However, no generic version of Restasis has been launched yet.
Investor focus on the call will be on management’s comments on the potential impact of generic competition for key growth drivers, Restasis and Namenda XR.
Nonetheless, key products like Botox, Juvéderm collection of fillers, Linzess and Lo Loestrin are likely to support sales growth in the quarter. The Zacks Consensus Estimate for Botox is $907 million.
Please note that sales of Botox (cosmetic) and Juvéderm were hurt by unfavorable timing of promotional offers and year-end physician rebate program in the first quarter. However, Allergan was optimistic on the first-quarter call that sales trends will normalize over the remainder of the year. On the call, Allergan said that sales for Botox (cosmetic) and Juvéderm are expected to increase at double-digit rates in 2018.
Second-quarter revenues should also benefit from the addition of Alloderm from LifeCell (January 2017) and CoolSculpting body contouring system from Zeltiq (April 2017) acquisitions.
We remind investors that on the first-quarter call, Allergan stated that first-quarter earnings benefited from favorable timing of operating expenses, which will reverse in the remaining quarters of the year. This suggests that operating costs could be higher in the second quarter. However, cost savings due to the successful execution of Allergan’s restructuring program should provide some bottom-line support. Pipeline re-prioritization efforts should continue to result in lower R&D costs. Gross margins are expected to be hurt by loss of exclusivity of high-margin products — Restasis, Estrace and Delzicol — and unfavorable product mix.
We remind investors that on the first-quarter call, the company had talked about a strategic review of its business due to the disconnect between its business performance and stock value. Management discussed several strategic options including incremental aggressive share buyback, divesting certain assets to concentrate more on key therapeutic areas, splitting the company and making smaller bolt-on acquisitions. An update on these plans is expected on the second-quarter call.
Earnings Whispers
Our proven model does not conclusively show that Allergan is likely to beat on earnings 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. That is not the case here, as you will see below.
Earnings ESP: Its Earnings ESP is -0.10% as the Most Accurate estimate stands at $4.12 while the Zacks Consensus Estimate is pegged higher at $4.13. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Allergan’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some large biotech/drug stocks worth considering per our model. These have the right combination of elements to beat on earnings this time around:
Pfizer (PFE - Free Report) is slated to announce financial figures on Jul 31. The company has an Earnings ESP of +0.89% and is also a Zacks #3 Ranked stock.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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Allergan (AGN) to Report Q2 Earnings: What's in the Cards?
Allergan plc will report second-quarter 2018 results on Jul 26, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 11.31%.
Allergan’s share price has risen 5% this year so far against the industry’s decline of 1.1%.
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 4.41%.
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 first-quarter conference call, management guided second-quarter revenues between $3.85 billion and $4.0 billion and earnings per share in the range of $4 to $4.20.
Lower sales of Namenda XR, Estrace cream, Minastrin and Asacol/Delzicol due to generic competition might hurt Allergan’s revenues in the second quarter.
While a generic version of Alzheimer’s treatment Namenda XR was launched by India based company, Lupin in February that of Estrace cream was launched by Mylan in January. A generic version of Delzicol is also expected to be launched soon. Allergan expected a generic version of Restasis, its second best-selling drug, to be launched between April and July of 2018. However, no generic version of Restasis has been launched yet.
Investor focus on the call will be on management’s comments on the potential impact of generic competition for key growth drivers, Restasis and Namenda XR.
Nonetheless, key products like Botox, Juvéderm collection of fillers, Linzess and Lo Loestrin are likely to support sales growth in the quarter. The Zacks Consensus Estimate for Botox is $907 million.
Please note that sales of Botox (cosmetic) and Juvéderm were hurt by unfavorable timing of promotional offers and year-end physician rebate program in the first quarter. However, Allergan was optimistic on the first-quarter call that sales trends will normalize over the remainder of the year. On the call, Allergan said that sales for Botox (cosmetic) and Juvéderm are expected to increase at double-digit rates in 2018.
Second-quarter revenues should also benefit from the addition of Alloderm from LifeCell (January 2017) and CoolSculpting body contouring system from Zeltiq (April 2017) acquisitions.
We remind investors that on the first-quarter call, Allergan stated that first-quarter earnings benefited from favorable timing of operating expenses, which will reverse in the remaining quarters of the year. This suggests that operating costs could be higher in the second quarter. However, cost savings due to the successful execution of Allergan’s restructuring program should provide some bottom-line support. Pipeline re-prioritization efforts should continue to result in lower R&D costs. Gross margins are expected to be hurt by loss of exclusivity of high-margin products — Restasis, Estrace and Delzicol — and unfavorable product mix.
We remind investors that on the first-quarter call, the company had talked about a strategic review of its business due to the disconnect between its business performance and stock value. Management discussed several strategic options including incremental aggressive share buyback, divesting certain assets to concentrate more on key therapeutic areas, splitting the company and making smaller bolt-on acquisitions. An update on these plans is expected on the second-quarter call.
Earnings Whispers
Our proven model does not conclusively show that Allergan is likely to beat on earnings 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. That is not the case here, as you will see below.
Earnings ESP: Its Earnings ESP is -0.10% as the Most Accurate estimate stands at $4.12 while the Zacks Consensus Estimate is pegged higher at $4.13. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Allergan’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some large biotech/drug stocks worth considering per our model. These have the right combination of elements to beat on earnings this time around:
Bristol-Myers Squibb (BMY - Free Report) has an Earnings ESP of +0.79% and a Zacks Rank of 3. The company is scheduled to report second-quarter earnings on Jul 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
Pfizer (PFE - Free Report) is slated to announce financial figures on Jul 31. The company has an Earnings ESP of +0.89% and is also a Zacks #3 Ranked stock.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>