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Vertex Pharmaceuticals is the $75 billion champion of cystic fibrosis (CF) who is expected to grow sales 37% this year to $5.7 billion -- after a 37% topline advance last year.
Since 2012, Vertex has developed a suite of drug treatments for CF, including the "triple threat" combo Trikafta, which was approved by the FDA in October 2019.
Cystic fibrosis is a hereditary disease that affects the lungs and digestive system. The body produces thick and sticky mucus that can clog the lungs and obstruct the pancreas. CF can be life-threatening, and people with the condition tend to have a shorter-than-normal life span, with many adults not making it to their 30th birthday.
Vertex’s lead marketed products are Trikafta (elexacaftor/tezacaftor/ivacaftor and ivacaftor), Symdeko/Symkevi (tezacaftor in combination with ivacaftor), Orkambi (lumacaftor in combination with ivacaftor) and Kalydeco (ivacaftor), which are collectively approved to treat around 60% of the 75,000 CF patients in North America, Europe and Australia.
Trikafta, approved in people aged 12 years and older who have at least one F508del mutation, is under review in Europe and is also being evaluated in younger patients in the United States. With approval of Trikafta, Vertex can address a significantly larger CF patient population — almost 90% of patients with CF — in the future.
Q1 Quarter and Outlook
Despite COVID-19 related uncertainty, Vertex’s sales in 2020 are being driven by rapid uptake of Trikafta and higher international revenues due to reimbursement arrangements in key ex-U.S. countries. Trikafta’s early approval and launch was a significant milestone for Vertex.
On April 29, Vertex reported Q1 results and beat estimates for earnings and sales. The 2020 outlook sparked analysts to raise EPS estimates significantly with this year getting boosted 15.8% from $7.60 to $8.80, representing 65% growth.
The company recorded total revenues of $4.16 billion in 2019, up 37%. Orkambi accounted for 29.4% of the company’s total product revenues, Kalydeco accounted for 24.7%, Symdeko accounted for 35.4% and Trikafta comprised 10.5% of the same.
Vertex’s dependence on the CF franchise for growth is a concern, especially as competitors would only erode market share. But Vertex’s non-CF pipeline is progressing rapidly with data in multiple disease arenas expected in 2020: sickle cell disease, thalassemia and pain management.
Vertex + CRISPR = Potential Knockout Punch for Blood Disorders
Vertex is co-developing a gene editing treatment, CTX001 in partnership with CRISPR Therapeutics in two devastating diseases — sickle cell disease and thalassemia. Phase I/II studies of CTX001 in adult transfusion-dependent b-thalassemia in Europe and sickle cell disease in the United States are ongoing.
In June 2019, Vertex announced expansion of its collaboration with CRISPR Therapeutics and acquisition of privately held Exonics Therapeutics to boost its gene editing capabilities to develop novel therapies for Duchenne muscular dystrophy (“DMD”) and Myotonic dystrophy type 1 (DM1).
In the April 29 update, Vertex and partner CRISPR Therapeutics said they remain on track to provide additional data from the two ongoing Phase 1/2 studies of the investigational CRISPR/Cas9 gene-editing therapy CTX001 in patients with transfusion-dependent beta thalassemia and in patients with severe sickle cell disease in 2020.
Bottom line for VRTX: The COVID-19 crisis has put the Biotech sector in the spotlight and dozens of companies are responding with resourceful R&D and robust adaptations to clinical trial interruptions. Vertex is a strong leader here and should be part of any growth-oriented healthcare-focused portfolio.
Align Technology, the $16 billion maker of the premier clear dental "aligners" Invisalign, has seen growth estimates drop sharply in the wake of the global pandemic as dentists dramatically reduced patient care.
Even before the company's Q1 report on April 29, EPS projections for 2020 were falling from nearly $7 to almost $5. Then a 32% miss of 73 cents vs. expectations of $1.07 and withdrawn guidance caused this year's consensus to drop to $3.77. That's why ALGN is a Zacks #5 Rank Strong Sell right now.
ALGN reported revenues that edged up 0.4% year over year to $550.9 million in the quarter but missed the Zacks Consensus Estimate by 6.3%.
Align Technology president and CEO Joe Hogan described the challenges for the company...
"For Q1'20, total revenues were $551 million, down 15.2% sequentially and unchanged year-over-year, reflecting significantly lower than expected sales of Invisalign clear aligners and iTero scanners due to the COVID-19 pandemic. Revenues from clear aligners were $481.6 million and iTero scanner & services were $69.4 million. Clear aligner shipments were 359.4 thousand cases. Notwithstanding the impact of COVID-19, shipment volumes were up 2.9% year-over-year, reflecting solid growth from non-comprehensive products driven by the Invisalign Go system across all regions, as well as Invisalign Moderate. This was offset by a lower mix of comprehensive products due primarily to the shortfall in China."
China Coming Back
In an interview on CNBC's Mad Money, Hogan said it was a strong quarter, but that it fell apart in last two weeks when dental offices shut down. He noted the China order rate has bounced back 80%-85% since their economic re-opening and he expects a surge in demand when the COVID-19 crises passes. Hogan also offered that the company has recently added employees and expects business to grow 20%-30% per year.
One of the biggest bulls on the Street, Credit Suisse analyst Erin Wilson Wright, lowered the firm's price target on Align Technology to $275 from $320 and kept an Outperform rating on the shares. The analyst thought shares might edge lower following a disappointing Q1 miss and lack of clarity as it relates to expectations for the balance of 2020, noting several factors remain in flux as varying geographies enforce or lift social distancing protocols at a staggered and seemingly unpredictable pace.
But surprisingly, investors have reacted with continued buying at the $200 level and Monday saw a 12.6% jump to highs above $230 not seen since early March.
I've been a big fan of Align Technology for many years, ever since I first bought shares below $100. Part of the bull thesis is not only do they offer an affordable teeth-straightening solution that makes over 2 million teens smile brighter, but that this technology is digitally-based and their precision iTero scanner is the key to huge markets in China and India where remote manufacture and care is possible. That market is worth over $20 billion this decade and Align has barely penetrated 10% of it.
Bottom line for ALGN: If investors are shrugging off the 30% collapse in earnings and looking ahead to Align's continued dominance in emerging markets with affordable digital dental technologies, then $200 may be the floor for some time. But best to wait for confirmation from a turnaround in the EPS estimates. The Zacks Rank will let you know.
Additional content:
Blue-Chip Retail Earnings on Deck: 3 Stocks to Keep an Eye On
Major retail players will be reporting first-quarter earnings numbers this week. The coronavirus outbreak has forced retailers selling discretionary items to shut outlets.
Meanwhile, retailers suppling essential commodities like food and cleaning products saw a considerable sales improvement in the quarter ending March.
What’s more, the results will provide a clear picture of how retailers have managed the unprecedented pressure on supply chains, particularly for essentials like cleaning supplies.
We will also gain an insight into the levels of cash flow and debt. After all, for any retailer, the ability to mitigate debt obligations is going to be crucial for survival.
Here we discuss three key retail earnings reports which could move markets –
Walmart
Retail behemoth, Walmart Inc. is scheduled to report first-quarter earnings on May 19, before market open. Walmart’s management hasn’t said anything recently about the impact of the pandemic on its performance. But the company has hired almost 200,000 new employees in the first quarter, which certainly indicates a spike in consumer demand.
And since Walmart is currently the country’s biggest supplier of grocery products, its quite evident that grocery sales amid the crisis have ticked up, compelling the company to expand its workforce. Thus, the company’s overall revenues for the first quarter are expected at $130.89 billion, suggesting a 5.6% rise from a year ago.
But the company has faced considerable stress due to the pandemic that might have dented its profits. For instance, the company had to bear expenses like employee bonuses amid the lockdown in the first quarter. Similarly, the company had to shoulder additional costs related to supply chain requirement, which likely hampered its profit margins. Analysts, thus, expect Walmart’s earnings per share at $1.12 for the first quarter compared with $1.13 a year ago.
The Zacks Rank #3 (Hold) company has an Earnings ESP of -1.13%. Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Home Depot
Home Depot will report first-quarter fiscal 2020 results on May 19, before market open. The home improvement chain surely has faced a serious challenge as consumer spending declined in the quarter ending April 2020, thanks to the worst jobs market in history. Needless to say, the U.S. economy reported a record 20.537 million job losses in April.
To top it, pandemic-induced lockdowns forced the company to reduce operating hours during the vital spring promotional season and compelled the company to reduce hiring to fulfill social distancing norms at its stores. But as Americans are stuck at home, they are focused on spending on home improvement items. This showed in the modest improvement in March sales, per the Census Bureau.
At the same time, the company’s Pro segment gained in the said quarter from Home Depot’s efforts to simplify the Pro shopping experience. Hence, Home Depot expects revenues for the quarter at $27.31 billion, suggesting a 4.5% rise from the year-ago levels. The Zacks Rank #3 (Hold) company, by the way, has an Earnings ESP of +1.71%.
Target
Target is scheduled to report earnings results for the quarter ending April 2020 on May 20, before market open. Unlike Walmart, Target caters to both low-end as well as high-end consumers. At the same time, it derives sales from a slew of categories, including groceries, household essentials, apparel and electronic items.
Despite the pandemic, Target saw a spike of food and beverages in March and somewhat remained steady in April. Apparel sales may have declined a bit but sales of home improvement items and electronic have gone up, particularly in April. In fact, digital sales climbed 275% in the first three weeks of April. Target, thus, expects total revenues of $18.85 billion, suggesting nearly 7% rise from year-ago levels.
However, Target had to bear additional costs such as employee wages and bonuses, and an increase in supply chain expenses that might have eaten into profits. Analysts expect the company’s earnings per share at 73 cents, indicating a decline from the year-ago levels of $1.53 a share. The Zacks Rank #4 (Sell) company has an Earnings ESP of -28.94%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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/performancefor information about the performance numbers displayed in this press release.
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Vertex Pharmaceuticals, Align Technology, Walmart, Home Depot and Target highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – May 19, 2020 – Zacks Equity Research Shares of Vertex Pharmaceuticals (VRTX - Free Report) as the Bull of the Day, Align Technology (ALGN - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Walmart Inc. (WMT - Free Report) , Home Depot (HD - Free Report) and Target (TGT - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Vertex Pharmaceuticals is the $75 billion champion of cystic fibrosis (CF) who is expected to grow sales 37% this year to $5.7 billion -- after a 37% topline advance last year.
Since 2012, Vertex has developed a suite of drug treatments for CF, including the "triple threat" combo Trikafta, which was approved by the FDA in October 2019.
Cystic fibrosis is a hereditary disease that affects the lungs and digestive system. The body produces thick and sticky mucus that can clog the lungs and obstruct the pancreas. CF can be life-threatening, and people with the condition tend to have a shorter-than-normal life span, with many adults not making it to their 30th birthday.
Vertex’s lead marketed products are Trikafta (elexacaftor/tezacaftor/ivacaftor and ivacaftor), Symdeko/Symkevi (tezacaftor in combination with ivacaftor), Orkambi (lumacaftor in combination with ivacaftor) and Kalydeco (ivacaftor), which are collectively approved to treat around 60% of the 75,000 CF patients in North America, Europe and Australia.
Trikafta, approved in people aged 12 years and older who have at least one F508del mutation, is under review in Europe and is also being evaluated in younger patients in the United States. With approval of Trikafta, Vertex can address a significantly larger CF patient population — almost 90% of patients with CF — in the future.
Q1 Quarter and Outlook
Despite COVID-19 related uncertainty, Vertex’s sales in 2020 are being driven by rapid uptake of Trikafta and higher international revenues due to reimbursement arrangements in key ex-U.S. countries. Trikafta’s early approval and launch was a significant milestone for Vertex.
On April 29, Vertex reported Q1 results and beat estimates for earnings and sales. The 2020 outlook sparked analysts to raise EPS estimates significantly with this year getting boosted 15.8% from $7.60 to $8.80, representing 65% growth.
The company recorded total revenues of $4.16 billion in 2019, up 37%. Orkambi accounted for 29.4% of the company’s total product revenues, Kalydeco accounted for 24.7%, Symdeko accounted for 35.4% and Trikafta comprised 10.5% of the same.
Vertex’s dependence on the CF franchise for growth is a concern, especially as competitors would only erode market share. But Vertex’s non-CF pipeline is progressing rapidly with data in multiple disease arenas expected in 2020: sickle cell disease, thalassemia and pain management.
Vertex + CRISPR = Potential Knockout Punch for Blood Disorders
Vertex is co-developing a gene editing treatment, CTX001 in partnership with CRISPR Therapeutics in two devastating diseases — sickle cell disease and thalassemia. Phase I/II studies of CTX001 in adult transfusion-dependent b-thalassemia in Europe and sickle cell disease in the United States are ongoing.
In June 2019, Vertex announced expansion of its collaboration with CRISPR Therapeutics and acquisition of privately held Exonics Therapeutics to boost its gene editing capabilities to develop novel therapies for Duchenne muscular dystrophy (“DMD”) and Myotonic dystrophy type 1 (DM1).
In the April 29 update, Vertex and partner CRISPR Therapeutics said they remain on track to provide additional data from the two ongoing Phase 1/2 studies of the investigational CRISPR/Cas9 gene-editing therapy CTX001 in patients with transfusion-dependent beta thalassemia and in patients with severe sickle cell disease in 2020.
Bottom line for VRTX: The COVID-19 crisis has put the Biotech sector in the spotlight and dozens of companies are responding with resourceful R&D and robust adaptations to clinical trial interruptions. Vertex is a strong leader here and should be part of any growth-oriented healthcare-focused portfolio.
Bear of the Day:
Align Technology, the $16 billion maker of the premier clear dental "aligners" Invisalign, has seen growth estimates drop sharply in the wake of the global pandemic as dentists dramatically reduced patient care.
Even before the company's Q1 report on April 29, EPS projections for 2020 were falling from nearly $7 to almost $5. Then a 32% miss of 73 cents vs. expectations of $1.07 and withdrawn guidance caused this year's consensus to drop to $3.77. That's why ALGN is a Zacks #5 Rank Strong Sell right now.
ALGN reported revenues that edged up 0.4% year over year to $550.9 million in the quarter but missed the Zacks Consensus Estimate by 6.3%.
Align Technology president and CEO Joe Hogan described the challenges for the company...
"For Q1'20, total revenues were $551 million, down 15.2% sequentially and unchanged year-over-year, reflecting significantly lower than expected sales of Invisalign clear aligners and iTero scanners due to the COVID-19 pandemic. Revenues from clear aligners were $481.6 million and iTero scanner & services were $69.4 million. Clear aligner shipments were 359.4 thousand cases. Notwithstanding the impact of COVID-19, shipment volumes were up 2.9% year-over-year, reflecting solid growth from non-comprehensive products driven by the Invisalign Go system across all regions, as well as Invisalign Moderate. This was offset by a lower mix of comprehensive products due primarily to the shortfall in China."
China Coming Back
In an interview on CNBC's Mad Money, Hogan said it was a strong quarter, but that it fell apart in last two weeks when dental offices shut down. He noted the China order rate has bounced back 80%-85% since their economic re-opening and he expects a surge in demand when the COVID-19 crises passes. Hogan also offered that the company has recently added employees and expects business to grow 20%-30% per year.
One of the biggest bulls on the Street, Credit Suisse analyst Erin Wilson Wright, lowered the firm's price target on Align Technology to $275 from $320 and kept an Outperform rating on the shares. The analyst thought shares might edge lower following a disappointing Q1 miss and lack of clarity as it relates to expectations for the balance of 2020, noting several factors remain in flux as varying geographies enforce or lift social distancing protocols at a staggered and seemingly unpredictable pace.
But surprisingly, investors have reacted with continued buying at the $200 level and Monday saw a 12.6% jump to highs above $230 not seen since early March.
I've been a big fan of Align Technology for many years, ever since I first bought shares below $100. Part of the bull thesis is not only do they offer an affordable teeth-straightening solution that makes over 2 million teens smile brighter, but that this technology is digitally-based and their precision iTero scanner is the key to huge markets in China and India where remote manufacture and care is possible. That market is worth over $20 billion this decade and Align has barely penetrated 10% of it.
Bottom line for ALGN: If investors are shrugging off the 30% collapse in earnings and looking ahead to Align's continued dominance in emerging markets with affordable digital dental technologies, then $200 may be the floor for some time. But best to wait for confirmation from a turnaround in the EPS estimates. The Zacks Rank will let you know.
Additional content:
Blue-Chip Retail Earnings on Deck: 3 Stocks to Keep an Eye On
Major retail players will be reporting first-quarter earnings numbers this week. The coronavirus outbreak has forced retailers selling discretionary items to shut outlets.
Meanwhile, retailers suppling essential commodities like food and cleaning products saw a considerable sales improvement in the quarter ending March.
What’s more, the results will provide a clear picture of how retailers have managed the unprecedented pressure on supply chains, particularly for essentials like cleaning supplies.
We will also gain an insight into the levels of cash flow and debt. After all, for any retailer, the ability to mitigate debt obligations is going to be crucial for survival.
Here we discuss three key retail earnings reports which could move markets –
Walmart
Retail behemoth, Walmart Inc. is scheduled to report first-quarter earnings on May 19, before market open. Walmart’s management hasn’t said anything recently about the impact of the pandemic on its performance. But the company has hired almost 200,000 new employees in the first quarter, which certainly indicates a spike in consumer demand.
And since Walmart is currently the country’s biggest supplier of grocery products, its quite evident that grocery sales amid the crisis have ticked up, compelling the company to expand its workforce. Thus, the company’s overall revenues for the first quarter are expected at $130.89 billion, suggesting a 5.6% rise from a year ago.
But the company has faced considerable stress due to the pandemic that might have dented its profits. For instance, the company had to bear expenses like employee bonuses amid the lockdown in the first quarter. Similarly, the company had to shoulder additional costs related to supply chain requirement, which likely hampered its profit margins. Analysts, thus, expect Walmart’s earnings per share at $1.12 for the first quarter compared with $1.13 a year ago.
The Zacks Rank #3 (Hold) company has an Earnings ESP of -1.13%. Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Home Depot
Home Depot will report first-quarter fiscal 2020 results on May 19, before market open. The home improvement chain surely has faced a serious challenge as consumer spending declined in the quarter ending April 2020, thanks to the worst jobs market in history. Needless to say, the U.S. economy reported a record 20.537 million job losses in April.
To top it, pandemic-induced lockdowns forced the company to reduce operating hours during the vital spring promotional season and compelled the company to reduce hiring to fulfill social distancing norms at its stores. But as Americans are stuck at home, they are focused on spending on home improvement items. This showed in the modest improvement in March sales, per the Census Bureau.
At the same time, the company’s Pro segment gained in the said quarter from Home Depot’s efforts to simplify the Pro shopping experience. Hence, Home Depot expects revenues for the quarter at $27.31 billion, suggesting a 4.5% rise from the year-ago levels. The Zacks Rank #3 (Hold) company, by the way, has an Earnings ESP of +1.71%.
Target
Target is scheduled to report earnings results for the quarter ending April 2020 on May 20, before market open. Unlike Walmart, Target caters to both low-end as well as high-end consumers. At the same time, it derives sales from a slew of categories, including groceries, household essentials, apparel and electronic items.
Despite the pandemic, Target saw a spike of food and beverages in March and somewhat remained steady in April. Apparel sales may have declined a bit but sales of home improvement items and electronic have gone up, particularly in April. In fact, digital sales climbed 275% in the first three weeks of April. Target, thus, expects total revenues of $18.85 billion, suggesting nearly 7% rise from year-ago levels.
However, Target had to bear additional costs such as employee wages and bonuses, and an increase in supply chain expenses that might have eaten into profits. Analysts expect the company’s earnings per share at 73 cents, indicating a decline from the year-ago levels of $1.53 a share. The Zacks Rank #4 (Sell) company has an Earnings ESP of -28.94%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks 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/performancefor information about the performance numbers displayed in this press release.