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What's in the Cards for Endo (ENDP) this Earnings Season?

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Endo International plc (ENDP - Free Report) is expected to report second-quarter 2017 results on Aug 8, before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 9.82%. In fact, it pulled off a positive surprise in each of the trailing four quarters, recording an average positive surprise of 14.4%.

Shares of Endo’s have declined 34.8% year to date against the Zacks classified industry’s gain of 3.7%.

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

Factors Influencing This Quarter

We believe 2017 will continue to be challenging year for Endo as the generics base business and the legacy branded pain franchise are expected to decline further.

In fact, its Generics base business is under significant pressure due to intensifying consortium pricing pressures and additional competitive entrants and product discontinuations as well as discrete factors, including destocking and shifts in purchase timing owing to market conditions.

The company expects the underlying rate of base business price erosion to be in the high single-digit in 2017 (excluding the impact of product discontinuances, the full-year impact of prior year competitive events, and the impact of expected new competitive events in 2017). The segment is projected to decline in the high single-to-low double-digit percentage range in the same year,  which will be partially offset by growth in its sterile injectables and new launch revenues, respectively.

Meanwhile, Endo’s Branded segment continues to be under 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 divestiture of Strenda.

Also, international revenues in 2017 are expected to decline in the mid to high 20% range, reflecting the divestiture of Litha as well as the competitive pressure for Paladin and the impact of foreign exchange on Somar.

In Jul 2017, Endo announced that it will withdraw opioid pain medication Opana ER (oxymorphone hydrochloride extended release) from the market following the FDA’s request in June. The move comes in wake of the widespread opioid abuse epidemic. Consequently, the company expects to incur a pre-tax impairment charge of approximately $20 million in the to-be-reported quarter to write-off the remaining net book value of its drug.

On the second-quarter earnings call, investors are expected to focus on the company’s performance. Updates on its restructuring efforts across the Generics product and R&D portfolio as well as its manufacturing facility network are expected by the investors.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Endo 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. That is not the case here, as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.35%. This is because the Most Accurate estimate is 75 cents while the Zacks Consensus Estimate is pegged lower at 74 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Endo currently carries a Zacks Rank #4 (Sell).

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.


Endo International PLC Price and EPS Surprise


Endo International PLC Price and EPS Surprise | Endo International PLC Quote

Stocks to Consider

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.

Tesaro, Inc. (TSRO - Free Report) has an Earnings ESP of +16.40% and a Zacks Rank #3.  The company is expected to release results on Aug 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Esperion Therapeutics, Inc. (ESPR - Free Report) has an Earnings ESP of +17.37% and a Zacks Rank #3.  The company is scheduled to release results on Aug 3.

Zoetis Inc. (ZTS - Free Report) has an Earnings ESP of +1.89% and a Zacks Rank #3.  The company is expected to release results on Aug 8.

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