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Gilead (GILD) Stock Likely to Beat This Earnings Season
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Gilead Sciences Inc. (GILD - Free Report) is scheduled to report second-quarter 2016 results on Jul 25, after the market closes. Last quarter, the company had missed expectations with a negative earnings surprise of 1.65%.
Gilead otherwise has an impressive track record, with earnings. The company’s earnings surpassed expectations in three of the last four quarters, with an average positive surprise of 6.39%. Will this biotech major be able to beat estimates this time? Let's see how things are shaping up for this announcement.
Factors Likely to Impact Q2 Results
In the first quarter of 2016, Gilead’s hepatitis C virus (HCV) franchise, consisting of blockbuster drugs Sovaldi and Harvoni, registered both sequential (12.2%) and year-over-year (5.6%) decline. The year-over-year decline was mainly due to lower sales of Harvoni in the U.S. (down 53.3% year over year to $1.4 billion), reflecting lower patient starts and the full-quarter impact of higher commercial rebates, which were entered into during the first quarter of 2015.
The sequential decline was primarily due to lower revenues in the U.S. and Japan. However, Sovaldi had recorded growth in the first quarter of 2016. Performance of the HCV franchise was also disappointing in Europe.
Nevertheless, Gilead noted on the first-quarter call that there was an uptick in new patients in the first quarter of 2016 and the company expects new patient starts to remain consistent through 2016. The company expects its HCV business to remain strong and sustainable.
Good news came in for the HCV franchise during second-quarter 2016. Gilead was successful in its efforts to expand its HCV franchise. Late last month, the company gained FDA approval for Epclusa, the first all-oral, pan-genotypic, single-tablet regimen for the treatment of adults with genotype 1-6 chronic HCV. It is also approved for use in certain other patient populations. Subsequently, Epclusa gained EU approval earlier this month.
As far as the HIV business is concerned, Genvoya, the company’s first tenofovir alafenamide (TAF)-based single-tablet regimen for the treatment of HIV-1 infection uptake, has been strong both in the U.S. and EU since the drug’s launch in Nov 2015. Genvoya may soon be among the most prescribed products for patients new to treatment.
While Descovy was launched both in the U.S. and EU during the quarter, Odefsey gained approval in the EU. Both Descovy and Odefsey are the two other TAF-based regimens in the company’s HIV franchise. TAF-based regimens are expected to drive the HIV franchise’s sales.
Given the launch of these TAF-based regimens, the company expects switches out of tenofovir disoproxil fumarate (TDF)-based single-tablet regimens into the TAF regimens to grow significantly. The company at the same time believes it can maintain its ability to retain switch patients (implying fewer patients to switch from Gilead's TDF-containing regimens to non-Gilead products). The company noted on the first-quarter call that 82% of Genvoya's prescriptions came from switches while 49% of the switches have come from Stribild (another HIV-1 drug belonging to Gilead).
Other antivirals and products are expected to perform well. For 2016, Gilead continues to expect net product sales in the range of $30–$31 billion.
Meanwhile, Gilead is actively pursuing partnerships/acquisitions to strengthen its product portfolio as well as pipeline. During the quarter, the company acquired Nimbus Apollo, Inc. and its acetyl-CoA carboxylase inhibitor program in a deal worth up to $1.2 billion.
On the second-quarter call, investors should keep an eye on the guidance based on the company’s performance while deals/acquisitions are also something to look out for.
Why a Likely Positive Surprise?
For the second quarter of 2016, our proven model also shows that Gilead is likely to beat earnings estimates because it has the right combination of two key ingredients.
Positive Zacks ESP:Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +6.91%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.
Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1 (Strong Buy), #2 and #3 (Hold) have a significantly higher chance of beating earnings. However, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
The combination of Gilead’s Zacks Rank #2 and +6.91% ESP makes us reasonably confident of an earnings beat this season.
Gilead is not the only company looking up this earnings season. Here are a couple of other health care stocks that you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this quarter.
Eli Lilly and Co. (LLY - Free Report) has an Earnings ESP of +1.18% and a Zacks Rank #3. The company is scheduled to release second-quarter results on Jul 26.
Amgen Inc. (AMGN - Free Report) has an Earnings ESP of +1.10% and a Zacks Rank #3. It is scheduled to report second-quarter results on Jul 27.
Bristol-Myers Squibb Co. (BMY - Free Report) has an Earnings ESP of +1.49% and a Zacks Rank #1. It is scheduled to report second-quarter results on Jul 28.
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Gilead (GILD) Stock Likely to Beat This Earnings Season
Gilead Sciences Inc. (GILD - Free Report) is scheduled to report second-quarter 2016 results on Jul 25, after the market closes. Last quarter, the company had missed expectations with a negative earnings surprise of 1.65%.
Gilead otherwise has an impressive track record, with earnings. The company’s earnings surpassed expectations in three of the last four quarters, with an average positive surprise of 6.39%. Will this biotech major be able to beat estimates this time? Let's see how things are shaping up for this announcement.
Factors Likely to Impact Q2 Results
In the first quarter of 2016, Gilead’s hepatitis C virus (HCV) franchise, consisting of blockbuster drugs Sovaldi and Harvoni, registered both sequential (12.2%) and year-over-year (5.6%) decline. The year-over-year decline was mainly due to lower sales of Harvoni in the U.S. (down 53.3% year over year to $1.4 billion), reflecting lower patient starts and the full-quarter impact of higher commercial rebates, which were entered into during the first quarter of 2015.
The sequential decline was primarily due to lower revenues in the U.S. and Japan. However, Sovaldi had recorded growth in the first quarter of 2016. Performance of the HCV franchise was also disappointing in Europe.
Nevertheless, Gilead noted on the first-quarter call that there was an uptick in new patients in the first quarter of 2016 and the company expects new patient starts to remain consistent through 2016. The company expects its HCV business to remain strong and sustainable.
Good news came in for the HCV franchise during second-quarter 2016. Gilead was successful in its efforts to expand its HCV franchise. Late last month, the company gained FDA approval for Epclusa, the first all-oral, pan-genotypic, single-tablet regimen for the treatment of adults with genotype 1-6 chronic HCV. It is also approved for use in certain other patient populations. Subsequently, Epclusa gained EU approval earlier this month.
As far as the HIV business is concerned, Genvoya, the company’s first tenofovir alafenamide (TAF)-based single-tablet regimen for the treatment of HIV-1 infection uptake, has been strong both in the U.S. and EU since the drug’s launch in Nov 2015. Genvoya may soon be among the most prescribed products for patients new to treatment.
While Descovy was launched both in the U.S. and EU during the quarter, Odefsey gained approval in the EU. Both Descovy and Odefsey are the two other TAF-based regimens in the company’s HIV franchise. TAF-based regimens are expected to drive the HIV franchise’s sales.
Given the launch of these TAF-based regimens, the company expects switches out of tenofovir disoproxil fumarate (TDF)-based single-tablet regimens into the TAF regimens to grow significantly. The company at the same time believes it can maintain its ability to retain switch patients (implying fewer patients to switch from Gilead's TDF-containing regimens to non-Gilead products). The company noted on the first-quarter call that 82% of Genvoya's prescriptions came from switches while 49% of the switches have come from Stribild (another HIV-1 drug belonging to Gilead).
Other antivirals and products are expected to perform well. For 2016, Gilead continues to expect net product sales in the range of $30–$31 billion.
Meanwhile, Gilead is actively pursuing partnerships/acquisitions to strengthen its product portfolio as well as pipeline. During the quarter, the company acquired Nimbus Apollo, Inc. and its acetyl-CoA carboxylase inhibitor program in a deal worth up to $1.2 billion.
On the second-quarter call, investors should keep an eye on the guidance based on the company’s performance while deals/acquisitions are also something to look out for.
Why a Likely Positive Surprise?
For the second quarter of 2016, our proven model also shows that Gilead is likely to beat earnings estimates because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +6.91%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.
Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1 (Strong Buy), #2 and #3 (Hold) have a significantly higher chance of beating earnings. However, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
The combination of Gilead’s Zacks Rank #2 and +6.91% ESP makes us reasonably confident of an earnings beat this season.
GILEAD SCIENCES Price and EPS Surprise
GILEAD SCIENCES Price and EPS Surprise | GILEAD SCIENCES Quote
Other Stocks That Warrant a Look
Gilead is not the only company looking up this earnings season. Here are a couple of other health care stocks that you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this quarter.
Eli Lilly and Co. (LLY - Free Report) has an Earnings ESP of +1.18% and a Zacks Rank #3. The company is scheduled to release second-quarter results on Jul 26.
Amgen Inc. (AMGN - Free Report) has an Earnings ESP of +1.10% and a Zacks Rank #3. It is scheduled to report second-quarter results on Jul 27.
Bristol-Myers Squibb Co. (BMY - Free Report) has an Earnings ESP of +1.49% and a Zacks Rank #1. It is scheduled to report second-quarter results on Jul 28.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>