With the Q2 earnings season shifting into top gear this week, the earnings picture has not been as dismal as was expected – of the 130 S&P 500 companies that have reported so far (Jul 25), 70.8% surpassed earnings estimates while 54.6% topped revenue expectations.
The picture that is emerging from the Q2 earnings reports shows signs of improvement that should boost investor sentiment for the second half of the year and beyond. However, growth still remains elusive and Q2 is headed to be the fifth quarter in a row to record an earnings decline for the S&P 500 index. Meanwhile, a plethora of earnings reports are yet to come out with more than 1,000 companies including 189 S&P 500 members due to report this week. This should add more clarity to the overall earnings picture.
With several pharma and major biotech companies slated to report their earnings results this week, the focus rightfully shifts to the Medical sector. Medical is one of the seven sectors expected to record earnings growth in Q2. Earnings in the Medical sector are expected to grow 1.7% on revenue growth of 7.7%, per our
Earnings Trends report.
Results reported so far have been a mixed bag with companies like Johnson & Johnson (
JNJ - Free Report) , Novartis AG ( NVS - Free Report) and Abbott Laboratories ( ABT - Free Report) surpassing expectations. On the other hand, biotech major Gilead Sciences Inc. ( GILD - Free Report) reported disappointing results – earnings topped expectations by just a penny while revenues fell short. Gilead even lowered its product sales guidance for the year. However, Biogen Inc. ( BIIB - Free Report) , another major biotech, breezed past earnings estimates and also raised its guidance for the year.
In this scenario, let’s see what awaits these five drug stocks when they report earnings results on Jul 28, before the opening bell. Investors interested will be eagerly watching for beats and misses.
Will these Drug Stocks Surprise?
Large-cap pharma stock,
Bristol-Myers Squibb Company ( BMY - Free Report) has an impressive track record with the company consistently beating earnings expectations. Will this pharma giant be able to keep its earnings streak alive? This Zacks Rank #1 (Strong Buy) stock, which has an Earnings ESP of +1.49%, looks poised to beat expectations in Q2 as well. While the focus will be on the performance of key products including high-profile immuno-oncology drug, Opdivo, the HIV and HCV franchises are expected to remain under competitive pressure. With the company actively pursuing deals/acquisitions across different therapeutic areas, business development plans for the remainder of the year will also be something to look out for (read more: Bristol-Myers: Stock to Beat Earnings Again in Q2).
Celgene Corporation’s key drug, Revlimid, should continue to remain the key growth driver contributing significantly to the top line. Apart from Revlimid, performance of other drugs including Pomalyst/Imnovid, Otezla and Abraxane will be keenly watched. Focus will be on the company’s label expansion efforts along with other pipeline updates. Meanwhile, Celgene’s share buyback program should boost the bottom line.
Celgene’s track record has been mixed with the company beating earnings estimates on two occasions while missing in one and posting in line results in another. This Zacks Rank #3 (Hold) stock currently has an ESP of -0.81% for Q2 thereby making it difficult to predict an earnings beat (read more:
Celgene Q2 Earnings: Can the Stock Pull a Surprise?).
Developer of treatments targeting ultra-rare disorders,
Alexion Pharmaceuticals, Inc. ( ALXN - Free Report) has a disappointing track record with the company missing expectations in three of the last four quarters. Moreover, our proven model does not conclusively show that Alexion is likely to beat earnings estimates in Q2. This biotech stock’s Zacks Rank #5 (Strong Sell) which when combined with an ESP of 0.00% makes a beat unlikely this season.
The company had provided Q2 earnings and revenue guidance at the time of releasing first-quarter 2016 results. Focus will be on the sales ramp up of newly launched products Strensiq and Kanuma along with an update on the impact of macroeconomic issues on Soliris. Pipeline update will be another key area of focus (read more:
Alexion Q2 Earnings: Stock Likely to Disappoint).
ARIAD Pharmaceuticals Inc.’s sole marketed product, Iclusig, which is a leukemia drug, should benefit from continued demand, new patient additions and launch in additional territories. Apart from an update on brigatinib, focus will also be on this biotech stock’s progress with its strategic plans. ARIAD’s performance has been far from encouraging with the company missing expectations in three of the last four quarters. ARIAD has a Zacks Rank #4 (Sell) which when combined with an ESP of +10.00% makes a surprise prediction difficult this quarter (read more: ARIAD to Report Q2 Earnings: Will the Stock Surprise?).
Agenus Inc.’s ( AGEN - Free Report) performance has been mostly disappointing with the company missing estimates in all of the last four quarters. Agenus currently carries a Zacks Rank #3, which when combined with an ESP of 0.00% makes a surprise prediction difficult for this quarter. Being a development-stage biotech company, Agenus does not have any approved product in its portfolio and earns revenues primarily through fees received under collaboration and license agreements. In this scenario, investor focus will be on pipeline development (read more: Agenus: What's Ahead for the Stock in Q2 Earnings?).
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