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Will Endo (ENDP) Surprise This Earnings Season Again?
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Endo International plc is scheduled to report second-quarter 2016 results on Aug 8, after the market closes. The company has been consistently beating earnings expectations. In fact, Endo’s earnings surpassed expectations in each of the last four quarters, with an average positive surprise of 4.46%.
In the last reported quarter, the company delivered a positive earnings surprise 2.86%. Will Endo be able to surpass expectations this time around as well? Let's see how things are shaping up for this announcement.
Factors Likely to Impact Q2 Results – Headwinds & More
At the time of announcing its first-quarter 2016 results, Endo provided a dismal guidance for 2016 due to several headwinds including greater-than-expected price erosion across the Generics sector, delays on regulatory actions related to certain Endo products and an earlier-than-expected generic entrant for Voltaren Gel.
The company expects revenues in the range of $3.87 billion to $4.03 billion (old guidance: $4.32–$4.52 billion) and earnings in the range of $4.50 to $4.80 per share (old guidance: $5.85–$6.20). The company expects approximately 46% of revenues and 39% of earnings to come in the first half of 2016.
However, it anticipates revenues and earnings to pick up in the second half of the year, driven by the launches in the Par portfolio and continued growth of Xiaflex and Belbuca. Gross margin is expected in the range of 59–60% (old guidance: approximately 63–65%). The company anticipates a disproportionately high erosion of gross margin against revenues. Overall, the reduction in earnings guidance reflects lowered revenue and gross margin expectations.
Endo continued to witness erosion in the Generics business in the first quarter of 2016 and also lowered its expectations for the segment due to a number of factors. Some of the factors include aggressive pricing actions undertaken by its competitors, rapid erosion in the pain segment due to continued market contraction, increased competitive capacity and pressure, and the recently issued CDC guidelines that will continue to put pressure on an already soft pain market among other factors.
The company anticipates low single-digit growth in the business, compared with its previous expectations of mid-teens growth.
Endo’s Branded segment is also facing pressure due to additional competitive entrants as well as a continuous rise in the number of public policy and regulatory actions including the recent CDC guidelines related to opioid prescribing and use. Endo expects a mid-to-high teen decline at the segment in 2016.
The company also announced an accelerated restructuring of its Generics product and R&D portfolio, as well as the manufacturing facility network. This initiative is expected to result in approximately $60 million in annualized net run-rate savings by the fourth quarter of 2017. The company expects to see about $10 million in gross margin improvement this year. The restructuring will be complete by the third quarter of 2017.
On the second-quarter call, investors will be keen to know about the company’s performance along with that of its business segments. Whether the company will revise its guidance will be something that investors will be eagerly looking out for.
Earnings Whispers
Our proven model does not conclusively show that Endo is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 75 cents per share.
Zacks Rank: Endo currently carries a Zacks Rank #3. The stock’s Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.
Note that 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.
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter. These stocks carry a Zacks Rank #2 and are scheduled to report second-quarter results on Aug 9.
The Earnings ESP for Impax Laboratories Inc. is +3.03%.
Mylan N.V. has an Earnings ESP of +1.75%.
The Earnings ESP for Ionis Pharmaceuticals, Inc. (IONS - Free Report) is +38.00%.
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 >>
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Will Endo (ENDP) Surprise This Earnings Season Again?
Endo International plc is scheduled to report second-quarter 2016 results on Aug 8, after the market closes. The company has been consistently beating earnings expectations. In fact, Endo’s earnings surpassed expectations in each of the last four quarters, with an average positive surprise of 4.46%.
In the last reported quarter, the company delivered a positive earnings surprise 2.86%. Will Endo be able to surpass expectations this time around as well? Let's see how things are shaping up for this announcement.
Factors Likely to Impact Q2 Results – Headwinds & More
At the time of announcing its first-quarter 2016 results, Endo provided a dismal guidance for 2016 due to several headwinds including greater-than-expected price erosion across the Generics sector, delays on regulatory actions related to certain Endo products and an earlier-than-expected generic entrant for Voltaren Gel.
The company expects revenues in the range of $3.87 billion to $4.03 billion (old guidance: $4.32–$4.52 billion) and earnings in the range of $4.50 to $4.80 per share (old guidance: $5.85–$6.20). The company expects approximately 46% of revenues and 39% of earnings to come in the first half of 2016.
However, it anticipates revenues and earnings to pick up in the second half of the year, driven by the launches in the Par portfolio and continued growth of Xiaflex and Belbuca. Gross margin is expected in the range of 59–60% (old guidance: approximately 63–65%). The company anticipates a disproportionately high erosion of gross margin against revenues. Overall, the reduction in earnings guidance reflects lowered revenue and gross margin expectations.
Endo continued to witness erosion in the Generics business in the first quarter of 2016 and also lowered its expectations for the segment due to a number of factors. Some of the factors include aggressive pricing actions undertaken by its competitors, rapid erosion in the pain segment due to continued market contraction, increased competitive capacity and pressure, and the recently issued CDC guidelines that will continue to put pressure on an already soft pain market among other factors.
The company anticipates low single-digit growth in the business, compared with its previous expectations of mid-teens growth.
Endo’s Branded segment is also facing pressure due to additional competitive entrants as well as a continuous rise in the number of public policy and regulatory actions including the recent CDC guidelines related to opioid prescribing and use. Endo expects a mid-to-high teen decline at the segment in 2016.
The company also announced an accelerated restructuring of its Generics product and R&D portfolio, as well as the manufacturing facility network. This initiative is expected to result in approximately $60 million in annualized net run-rate savings by the fourth quarter of 2017. The company expects to see about $10 million in gross margin improvement this year. The restructuring will be complete by the third quarter of 2017.
On the second-quarter call, investors will be keen to know about the company’s performance along with that of its business segments. Whether the company will revise its guidance will be something that investors will be eagerly looking out for.
Earnings Whispers
Our proven model does not conclusively show that Endo is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 75 cents per share.
Zacks Rank: Endo currently carries a Zacks Rank #3. The stock’s Zacks Rank #3 when combined with an ESP of 0.00% makes surprise prediction difficult.
Note that 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.
ENDO INTL PLC Price and EPS Surprise
ENDO INTL PLC Price and EPS Surprise | ENDO INTL PLC Quote
Other Stocks That Warrant a Look
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter. These stocks carry a Zacks Rank #2 and are scheduled to report second-quarter results on Aug 9.
The Earnings ESP for Impax Laboratories Inc. is +3.03%.
Mylan N.V. has an Earnings ESP of +1.75%.
The Earnings ESP for Ionis Pharmaceuticals, Inc. (IONS - Free Report) is +38.00%.
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 >>