The second-quarter 2017 earnings season is nearing its last leg and the picture so far appears to be quite encouraging. After a few turbulent quarters, earnings for the second quarter of 2017 showed solid strength. As of Aug 4, approximately 420 S&P 500 companies or 86.1% of the index’s total market capitalization have reported results. A deep look into the results show that earnings for the companies reported are up 11.6% year over year on 5.6% higher revenues. Of these, 74.3% have topped earnings estimates while 68.3% have beat on revenue estimates resulting in a blended beat of 55.0%.
Growth in the second quarter came on the back of strong contribution from the Finance, Technology and Energy sectors. The growth is expected to persist in the second half of 2017 as well. Even though the pace of growth has been sluggish, total Q2 earnings for the index are currently up 10% from the same period last year on 5.1% higher revenues, much better than the 7.9% earnings growth projected at the start of the quarter. Going forward, the estimate for Q3 growth is 4.3%, down from 6.3% projected at the start of July.
How Did the Medical Sector Perform?
The Medical sector has more or less combated the overall decline in the financial markets and maintained momentum. So far 83.6% of the companies in the sector have reported results. Earnings are up 7.1% on 4% higher revenues resulting in a blended beat of 65.2%. Among these, industry bellwether Johnson & Johnson (JNJ - Free Report) reported mixed second-quarter results, beating on earnings but missing on sales estimates. Biotech giants Gilead Sciences (GILD - Free Report) and Biogen Inc. surpassed expectations both for earnings and sales in the second quarter of 2017 and raised their annual guidance.
Let’s take a look at the pharma/biotech companies that are set to report second-quarter results on Aug 8.
ACADIA Pharmaceuticals Inc. (ACAD - Free Report) is scheduled to report after the closing bell. The company has a dismal track record. ACADIA has missed estimates in two of the trailing four quarters, beat once and reported in-line results in the remaining quarter, resulting in an average negative surprise of 10.2%Currently, the company has a Zacks Rank #3 (Hold) and a 0.00% Earnings ESP . Although the current rank increases the predictive power of ESP, its 0.00% ESP makes it unlikely for the stock to beat estimates this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The FDA’s approval of Nuplazid in Apr 2016 was a major boost for the company. The drug is approved for the treatment of hallucinations and delusions associated with Parkinson’s disease psychosis and the drug has shown promising growth since its launch in May 2016. (Read more: Will ACADIA Pull Off a Surprise this Earnings Season? )
Jazz Pharmaceuticals Public Limited Company (JAZZ - Free Report) is scheduled to report results after the closing bell. Jazz has an encouraging earnings track record. The company has topped estimates in three of the last four quarters with an average positive earnings surprise of 14.48%. Currently, the company has a Zacks Rank #3 and a 0.00% Earnings ESP.
Investor focus will be on the performance of Jazz’s lead product, Xyrem, for cataplexy and excessive daytime sleepiness. Investors will also be looking out for the company’s pipeline progress. Defitelio’s sales ramped up in the U.S., while Xyrem face issues related to patent litigations. The company’s business development plans are also expected to draw attention. (Read more: Can Jazz Pharma Spring a Surprise in Q2 Earnings?)
Kite Pharma, Inc. (KITE - Free Report) is expected to report results before the market opens. The company has a mixed record of earnings surprises. It has reported positive earnings surprises in two and negative surprise in the other two of the last fourquarters, bringing the average surprise to a positive 2.07%.Currently, the company has a Zacks Rank #3 and a ESP of -0.51%.
With no approved products in its portfolio, investor focus will primarily be on Kite Pharma’s cash burn and pipeline updates. Kite Pharma’s lead drug axicabtagene ciloleucel is currently under priority review in the U.S. for treating aggressive non-Hodgkin lymphoma with a FDA decision expected on Nov 29. (Read more: What's in the Cards for Kite Pharma in Q2 Earnings)
Mallinckrodt plc (MNK - Free Report) is set to report second-quarter 2017 results. Mallinckrodt has delivered an average positive earnings surprise of 5.27% in the trailing four quarters. Mallinckrodt currently carries has a Zacks Rank #3 and an ESP of +0.58%. The combination of Mallinckrodt’s Zacks Rank #3 and positive ESP makes us reasonably optimistic of an earnings beat.
Mallinckrodt is currently focused on reshaping its product portfolio through strategic acquisitions and non-core asset divestitures. Acthar, Ofirmev and Inomax should drive the upside in our view. However, Mallinckrodt’s Specialty Generics segment continues to be a laggard. The weakness is expected to persist as stiff competition continues to hurt both volumes and prices. (Read more: Can Mallinckrodt Deliver a Beat this Earnings Season?)
Endo International plc (ENDP - Free Report) is expected to report second-quarter 2017 before the opening bell. The company has delivered a positive surprise in each of the trailing four quarters, recording an average positive surprise of 14.4%.Endo currently carries a Zacks Rank #4 (Sell) and an ESP of +1.35. We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement.
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. Further, In Jul 2017, Endo had to 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. (Read more: What's in the Cards for Endo this Earnings Season?)
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