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Will Gilead (GILD) Disappoint in Q3?

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Gilead Sciences, Inc. (GILD - Free Report) will be reporting third quarter 2013 results on Oct 29, after the closing bell. Last quarter, the company reported in line earnings. Let’s see how things are shaping up for the third quarter.

Factors at Play

Gilead boasts of a strong product portfolio and a diversified pipeline. We expect the company to provide an update on the company’s pipeline development efforts while releasing its third quarter results. Operating costs have been on the rise for the last few quarters due to Gilead’s efforts to develop its pipeline. Moreover, the company’s efforts to expand have also pushed up costs over the last few quarters. We expect operational expenses to increase in the third quarter of 2013 as well.

Moreover, factors like generic competition, adverse foreign currency movements (a significant portion of Gilead’s revenues are generated outside the U.S.) are also expected to impact the third quarter 2013 results.

Earnings Whispers?

Our proven model does not conclusively show that Gilead is likely to beat the Zacks Consensus Estimate in the third quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for Gilead is +2.13%. This is because the Most Accurate estimate stands at 47 cents while the Zacks Consensus Estimate is lower at 46 cents.

Zacks Rank: Gilead carries a Zacks Rank #4 (Sell), highlighting pressure on the stock. Though the ESP is positive, the unfavorable Zacks Rank serves as a dampener.

We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision momentum. Gilead has been witnessing negative estimate revisions. The third quarter 2013 earnings estimates have gone down by 2 cents over the last 7 days. Estimates for the year 2013 have also been on the downtrend, declining 4 cents over the same time period.  

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

Mylan, Inc. (MYL - Free Report) with Earnings ESP of +1.28% and a Zacks Rank #3.

Endo Health Solutions Inc. (ENDP - Free Report) , with Earnings ESP of +0.89% and a Zacks Rank #3.

Regeneron Pharmaceuticals, Inc. (REGN - Free Report) , with Earnings ESP of +10.10% and a Zacks Rank #3.

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