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What's in Store for Perrigo (PRGO) This Earnings Season?

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Perrigo Company plc (PRGO - Free Report) is scheduled to report third-quarter 2020 results on Nov 4, before market open. In the last reported quarter, the company delivered an earnings surprise of 18.39%.

The company’s earnings beat estimates in three of the past four quarters and missed the same once, delivering an average surprise of 8.02%.

Shares of Perrigo have lost 17.6% so far this year compared with the industry‘s decrease of 1.5%.

Factors at Play

The addition of products from the acquisition of Ranir Global Holdings last year drove sales at Perrigo’s Consumer Self Care Americas (“CSCA”) and Consumer Self Care International (“CSCI”) segments in the first half of 2020. We expect the trend to have continued in the third quarter. Moreover, new products have been witnessing significant sales — a trend that most likely continued in the soon-to-be-reported quarter. Moreover, acquisition of Oral Care Assets of High Ridge Brands in April is likely to have boosted sales in the third quarter. Moreover, launch of store brand equivalent of over-the-counter Voltaren Arthritis Pain drug in early September is likely to have brought additional revenues in the third quarter.

The COVID-19 pandemic boosted demand for Perrigo’s certain products in the first half of 2020, driving revenues. During the second quarter, the company saw lower-than-expected consumer pantry de-load in U.S. OTC market. However, impact of the pandemic in the third quarter remains to be seen.

However, loss of sales from the recall of Ranitidine, discontinued products and exited business, especially its Animal Health business sold to PetIQ (PETQ - Free Report) , might have offset the gain from the new products.

Although Perrigo is looking to spin-off its Rx business, higher sales of new products in the Rx segment and continued moderation of pricing pressure in the generics industry are likely to have driven segment sales.

Meanwhile, the favorable impact of the ongoing restructuring initiatives and operating expense discipline are likely to have boosted the bottom line.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Perrigo in this reporting cycle. 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. But that is not the case here as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate of 80 cents per share and the Zacks Consensus Estimate of 84 cents, is -5.36%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Perrigo carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are two biotech stocks that have the right combination of elements to beat on earnings this time around.

Coherus BioSciences (CHRS - Free Report) has an Earnings ESP of +13.04% and a Zacks Rank #2.

Incyte (INCY - Free Report) has an Earnings ESP of +5.35% and a Zacks Rank #3.

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