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5 Big Pharma/Biotech Stocks Set to Trump Q3 Earnings Estimates

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The third-quarter earnings season for pharma stocks has started with Johnson & Johnson reporting encouraging results last week. However, sales results of another big pharma player Roche, which also reported last week were average with sales rising 1% year over year.

Pharma stocks include large and small drug makers as well as biotechs focused on developing novel therapies. These stocks form part of the wider Medical sector, which comprises pharma/biotech as well as medical device companies.

The Earnings Trends report, published last week, shows that the companies from the Medical sector are projected to deliver 3.2% earnings growth on expected 9.5% improvement in sales from the year-ago quarter’s reported figures. In the second quarter, demand for several drugs was hurt by COVID-19-related business disruptions. However, drugmakers expect improved business conditions with the reopening of global economies to have increased sales in the third quarter.

Moreover, drug stocks engaged in developing a therapy or a vaccine for coronavirus benefited from the ongoing promising clinical development as well as huge funding support received from federal governments across the globe. A reviving economy and anticipated cash flow from coronavirus vaccine/treatment commercialization bode well for these companies. Meanwhile, new drugs and label expansions of blockbuster drugs are expected to have driven the top line of most big shots, backed by higher demand and in the process, combating generic plus biosimilar competition for older medicines.

Zeroing in on Winners

Here we highlighted five pharma/biotech companies, which are expected to deliver an earnings surprise in their upcoming quarterly results.

Earnings ESP is our proprietary methodology for determining the stocks that have maximum chances to deliver an earnings surprise. Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. The selection can be done with the help of the Zacks Stock Screener.

Our research shows that for stocks with this ideal combination, chances of an earnings surprise are as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

5 Pharma/Biotech Stocks That Match the Perfect Criteria

GlaxoSmithKline plc (GSK - Free Report) )

This British multinational pharmaceutical with presence in several fields including respiratory, HIV, oncology and vaccines has an Earnings ESP of +7.23% and a Zacks Rank of 3. The Zacks Consensus Estimate for the third quarter is pegged at 78 cents per ADS. The company is scheduled to release results on Oct 28. You can see the complete list of today’s Zacks #1 Rank stocks here.

Glaxo’s earnings beat estimates in two of the last four quarters and missed the same twice, the average surprise being 7.33%.

GlaxoSmithKline plc Price and EPS Surprise

GlaxoSmithKline plc Price and EPS Surprise

GlaxoSmithKline plc price-eps-surprise | GlaxoSmithKline plc Quote

Merck Co., Inc. (MRK - Free Report) )

This Kenilworth, NJ-based pharmaceutical company has an Earnings ESP of +2.60% and a Zacks Rank #3. The Zacks Consensus Estimate for the third quarter is pegged at $1.44 per share. The company is scheduled to release results on Oct 27.

Merck’s earnings performance has been impressive with the company having delivered a positive surprise in all the trailing four quarters, the average being 12.66%.

Merck Co., Inc. Price and EPS Surprise

Merck  Co., Inc. Price and EPS Surprise

Merck Co., Inc. price-eps-surprise | Merck Co., Inc. Quote

Bristol Myers Squibb Company (BMY - Free Report) )

The New York-based leading global specialty biopharmaceutical company developing therapies for serious diseases including oncology has an Earnings ESP of +1.01% and is #3 Ranked. The Zacks Consensus Estimate for the third quarter is pegged at $1.49 per share. The company is scheduled to release results on Nov 5.

In the trailing four quarters, Bristol Myers delivered a positive earnings surprise in three of the last four quarters and missed estimates once, the average beat being 8.02%.

Vertex Pharmaceuticals Incorporated (VRTX - Free Report) )

The Boston, MA-based biotech developing therapies for cystic fibrosis has an Earnings ESP of +0.88% and a Zacks Rank #2. The Zacks Consensus Estimate for the third quarter is pegged at $2.35 per share.

Vertex boasts a stellar earnings record. Its earnings beat expectations in all the last four quarters, the average being 27.71%.

Seagen, Inc. (SGEN - Free Report) )

This Bothell, WA-based biotechnology company, primarily focusing on developing and commercializing therapies targeted for the treatment of cancer, has an Earnings ESP of +307.95% and is Zacks #3 Ranked. The Zacks Consensus Estimate for the third quarter is pegged at a loss of 15 cents per share. The company is scheduled to release results on Oct 29.

Seagen’s bottom line beat estimates in three of the trailing four quarters and missed the same once, the average surprise being 8.26%.

Seattle Genetics, Inc. Price and EPS Surprise

Seattle Genetics, Inc. Price and EPS Surprise

Seattle Genetics, Inc. price-eps-surprise | Seattle Genetics, Inc. Quote

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