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Exelixis (EXEL) Q3 Earnings: What's in Store for the Stock?

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Exelixis, Inc. (EXEL - Free Report) is scheduled to report third-quarter 2016 results on Nov 3 after the market closes.

Exelixis had a mixed track record over the last four quarters. The company surpassed expectations twice in the four trailing quarters and missed the same in the remaining two with an average positive earnings surprise of 9.10%.

EXELIXIS INC Price and EPS Surprise

 

EXELIXIS INC Price and EPS Surprise | EXELIXIS INC Quote

Let's see how things are shaping up for this announcement.

Factors at Play

Exelixis' lead drug, Cometriq, the capsule form of cabozantinib, is approved for the treatment of progressive, metastatic medullary thyroid cancer (MTC).

The company received a significant boost in Apr 2016, when the FDA approved Cabometyx a tablet formulation of cabozantinib,for the treatment of patients with advanced renal cell carcinoma (RCC) who have received prior anti-angiogenic therapy. Initial uptake of the drug was encouraging and is expected to propel the top line in the forthcoming quarters.

Meanwhile, Cabometyx also received approval in the EU in September, which triggered a milestone payment of $60 million to Exelixis which should boost revenues in the third quarter.

The product will be marketed in the EU by Exelixis’ partner, Ipsen.

However, the company expects Cometriq revenues to gradually decline over time as RCC patients come off Cometric therapy and new patients initiate therapy with Cabometyx. However, successful commercialization of the other marketed drug, Cotellic in the U.S. will boost the top line.  Cotellic is approved in the U.S. and EU  to be used in combination with Roche Holding’s Zelboraf in the U.S. for the treatment for patients with BRAF V600E or V600K mutation-positive advanced melanoma.

However, expenses are expected to increase as the company prepares for the commercialization of Cabometyx in the U.S. and the EU.

Earnings Whispers

Our proven model does not conclusively show that Exelixis is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat earnings. That 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 -7.69% since the Most Accurate stands at a loss of 14 cents while the Zacks Consensus Estimate is at a loss of 13 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank:Exelixis carries a Zacks Rank #2. This when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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.

Infinity Pharmaceuticals, Inc. is expected to report its results on Nov 3. It has an Earnings ESP of +5.81% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Ariad Pharmaceuticals Inc. is +5.26% and it sports a Zacks Rank #2(Buy). The company is expected to release results on Nov 1.

Aerie Pharmaceuticals, Inc. has an Earnings ESP of +8.57% and carries a Zacks Rank #3. It is scheduled to report its results on Nov 2.

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