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Will Amgen (AMGN) Keep the Earnings Streak Alive in Q4?
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We expect biotech major Amgen Inc. (AMGN - Free Report) to beat expectations when it reports fourth-quarter 2016 and full-year results on Feb 2 after the market closes. Amgen had delivered a positive earnings surprise of 8.24% in the last quarter.
Amgen’s shares were up 4.6% so far this year. This compares favorably with the 1.7% increase registered by the Zacks classified Biomed/Genetics industry during this period.
Amgen’s performance has been pretty impressive, with the company reporting positive surprises consistently. The average earnings beat over the last four quarters is 10.04%.
Let’s see how things are shaping up for the company this quarter
Factors at Play
Amgen’s growth products including Prolia, Xgeva, Vectibix, Sensipar should continue to perform well. While new patient adoption and repeat injections will drive Prolia, Xgeva is expected to overcome competition on the back of its superior clinical profile.
However, blockbuster drug Enbrel is facing increasing competition in the dermatology segment which will continue to hurt its sales. Management expects minimal sales price increases and stiff competition to hurt Enbrel sales in 2017.
Moreover, Kyprolis sales were below expectations in the past couple of quarters due to increased competition in the multiple myeloma market. It remains to be seen if sales pick up in the fourth quarter.
Meanwhile, Epogen, Neulasta and Neupogen sales are expected to continue to be impacted by competition. Note that Neupogen is already facing biosimilar competition in the U.S. mainly from Zarxio, Sandoz’s biosimilar version of Neupogen, which was launched in the U.S. in Sep 2015. However, Amgen does not expect Epogen biosimilars in the U.S. until late 2017.
The bottom line will continue to be driven by the company’s overall cost-cutting efforts and share buybacks. However, at the third-quarter conference call, management had mentioned expectation of a sequential increase in operating expenses in the fourth quarter.
Investor focus on the fourth-quarter call will remain on the performance of the company’s PCSK9 inhibitor, Repatha, its acceptance in the physician community, the formulary scenario for the product and its performance in other territories where it is being launched. We expect Repatha sales to pick up once positive outcomes data is available and added to the label. Also, investors expect management to make a comment on Amgen’s win in the Repatha patent lawsuit. Earlier this month, Amgen announced that the U.S. District Court in Delaware granted Amgen's request for a permanent injunction prohibiting the sale of Sanofi (SNY - Free Report) /Regeneron’s PCSK9 inhibitor, Praluent.
Also, Parsabiv received approval for the treatment of secondary hyperparathyroidism (SHPT) in Nov 2016. Investors also expect management to shed light on its commercialization plans for the drug at the fourth-quarter conference call.
What Our Model Indicates
Our proven model shows that Amgen is likely to beat on earnings because it has the right combination of the two key ingredients. 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) for this to happen and Amgen has the right mix.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate ($2.82 per share) and the Zacks Consensus Estimate ($2.78 per share), is +1.44%. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Amgen has a Zacks Rank #3. Sell-rated stocks (Zacks Rank #4 or 5), on the other hand, should never be considered going into an earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
The combination of Amgen’s favorable Zacks Rank #3 and positive ESP makes us confident of an earnings beat in the upcoming release.
Other Stocks to Consider
Other stocks in the large cap pharmaceuticals sector that have both a positive ESP and a favorable Zacks Rank are:
Pfizer, Inc. (PFE - Free Report) has an Earnings ESP of +2.04% and a Zacks Rank #3. The company is scheduled to release results on Jan 31.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>
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Will Amgen (AMGN) Keep the Earnings Streak Alive in Q4?
We expect biotech major Amgen Inc. (AMGN - Free Report) to beat expectations when it reports fourth-quarter 2016 and full-year results on Feb 2 after the market closes. Amgen had delivered a positive earnings surprise of 8.24% in the last quarter.
Amgen’s shares were up 4.6% so far this year. This compares favorably with the 1.7% increase registered by the Zacks classified Biomed/Genetics industry during this period.
Amgen’s performance has been pretty impressive, with the company reporting positive surprises consistently. The average earnings beat over the last four quarters is 10.04%.
Amgen Inc. Price and EPS Surprise
Amgen Inc. Price and EPS Surprise | Amgen Inc. Quote
Let’s see how things are shaping up for the company this quarter
Factors at Play
Amgen’s growth products including Prolia, Xgeva, Vectibix, Sensipar should continue to perform well. While new patient adoption and repeat injections will drive Prolia, Xgeva is expected to overcome competition on the back of its superior clinical profile.
However, blockbuster drug Enbrel is facing increasing competition in the dermatology segment which will continue to hurt its sales. Management expects minimal sales price increases and stiff competition to hurt Enbrel sales in 2017.
Moreover, Kyprolis sales were below expectations in the past couple of quarters due to increased competition in the multiple myeloma market. It remains to be seen if sales pick up in the fourth quarter.
Meanwhile, Epogen, Neulasta and Neupogen sales are expected to continue to be impacted by competition. Note that Neupogen is already facing biosimilar competition in the U.S. mainly from Zarxio, Sandoz’s biosimilar version of Neupogen, which was launched in the U.S. in Sep 2015. However, Amgen does not expect Epogen biosimilars in the U.S. until late 2017.
The bottom line will continue to be driven by the company’s overall cost-cutting efforts and share buybacks. However, at the third-quarter conference call, management had mentioned expectation of a sequential increase in operating expenses in the fourth quarter.
Investor focus on the fourth-quarter call will remain on the performance of the company’s PCSK9 inhibitor, Repatha, its acceptance in the physician community, the formulary scenario for the product and its performance in other territories where it is being launched. We expect Repatha sales to pick up once positive outcomes data is available and added to the label. Also, investors expect management to make a comment on Amgen’s win in the Repatha patent lawsuit. Earlier this month, Amgen announced that the U.S. District Court in Delaware granted Amgen's request for a permanent injunction prohibiting the sale of Sanofi (SNY - Free Report) /Regeneron’s PCSK9 inhibitor, Praluent.
Also, Parsabiv received approval for the treatment of secondary hyperparathyroidism (SHPT) in Nov 2016. Investors also expect management to shed light on its commercialization plans for the drug at the fourth-quarter conference call.
What Our Model Indicates
Our proven model shows that Amgen is likely to beat on earnings because it has the right combination of the two key ingredients. 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) for this to happen and Amgen has the right mix.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate ($2.82 per share) and the Zacks Consensus Estimate ($2.78 per share), is +1.44%. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Amgen has a Zacks Rank #3. Sell-rated stocks (Zacks Rank #4 or 5), on the other hand, should never be considered going into an earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
The combination of Amgen’s favorable Zacks Rank #3 and positive ESP makes us confident of an earnings beat in the upcoming release.
Other Stocks to Consider
Other stocks in the large cap pharmaceuticals sector that have both a positive ESP and a favorable Zacks Rank are:
Eli Lilly and Company (LLY - Free Report) has an Earnings ESP of +1.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here. The company is scheduled to release results on Jan 31.
Pfizer, Inc. (PFE - Free Report) has an Earnings ESP of +2.04% and a Zacks Rank #3. The company is scheduled to release results on Jan 31.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>